UK business rates are a tax on non-domestic property and they vary depending where the premises are located. Business rates in England are different to those in Wales, Scotland and Northern Ireland.
Business rates in the UK are largely unavoidable, but you should ensure you are taking advantage of any available reliefs.
UK business rates are worked out by multiplying the rateable value of commercial premises by the business rates multiplier.
For properties in England and Wales, the Valuation Office determines the rateable value used for business rates (equivalents exist in Scotland and Northern Ireland). Rateable values are typically reassessed every five years or when business premises are altered.
There are different UK business rates multipliers for England, Wales, Scotland and Northern Ireland (with a special multiplier for premises in the City of London). The multiplier tends to increase each year, thereby increasing the amount of business rates payable.
In England, you qualify as a small business if your business premises have a rateable value below £18,000 (or £25,500 in London). Even if you do not qualify for small busines rate relief (outlined below), as a small business, your rates will be calculated using the lower small business multiplier instead of the standard multiplier.
Additional rate relief in the form of small business rate relief is given for rateable values below £12,000. Businesses with a rateable value up to £6,000 receive 100% relief. The relief is then gradually reduced from 100% to 0% for properties with rateable values between £6,001 and £12,000. The Chancellor announced that this relief would be extended until 31 March 2017.
You will not qualify for small business rate relief if you have more than one business property, unless each other property has a rateable value below £2,600. The rateable value of all your properties will be added together and the relief is then applied to the main property.
In other parts of the UK, business rates relief is also available for smaller businesses, but using different schemes.
UK business rates relief schemes vary from country to country. In England, the main reliefs are transitional rate relief, empty property relief and rural rate relief.
Transitional rate relief cushions the impact of rates revaluation. The relief limits the amount by which business rates can increase (or decrease) from one year to the next if there has been a significant change in your rateable value
Empty property relief exempts empty properties from business rates for the first three months after they become vacant. Longer periods apply to some properties including industrial premises (six months) and premises with a rateable value below £2,600 (until occupied).
Rural rate relief applies to some rural businesses — for example, the only remaining village shop. Businesses that qualify get discretionary relief (decided by the local authority) which could be as much as 100%. You may also qualify for rate relief if your organisation is a charity or amateur community sports club or another type of non-profit oganisation. You can find more information on these special rates relief schemes on the Valuation Office Agency website (VOA).
Some buildings are exempted from business rates entirely. This includes some agricultural buildings, places of public religious worship and buildings used for the training or welfare of disabled people.
For most UK businesses rates are simply another tax that must be paid, but there are circumstances where planning can reduce your bills.
If you think the rateable value has been wrongly assessed or if there have been changes to your premises, it may be worth appealing. Changes that can affect the rateable value of your premises include alterations, change of use or changes in the surrounding area. The VOA has produced information for businesses which think their rateable value is wrong. You may also want to take advice from a reputable rating agent.
If you expect to be responsible for empty commercial premises for a significant period, you may want to consider your options. For example, attracting a relatively short-term tenant at a low rent can allow you another three (or six) months’ empty rates relief after the tenant vacates the premises.
If you use part of your home as business premises, you may need to check whether UK business rates are payable. This is most likely to be the case if part of your home is used exclusively for business or adapted for business purposes.