Compliance
Essentials
An Introduction to Business Rates.
CIBR02/10/JULY2019
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Notes
An introduction to business rates Introduction Businesses have to pay business rates as a contribution to the cost of services provided by local authorities. This guide will outline what business rates are and the types of premises on which they are payable. It explains how business rates are calculated and how the rateable value of business premises is determined in England, Wales, Scotland and Northern Ireland.
What are business rates? Business Rates (also known as National Non-Domestic Rates) is a tax on business properties which is paid by the occupier of the property. If a non-domestic property is unoccupied, the owner is responsible for paying business rates. Revenue raised from business rates helps to fund local authority services.
What types of premises do business rates apply to? Business rates normally apply to non-domestic properties such as shops, offices, warehouses, factories, pubs, guest houses and holiday rental cottages. In some cases, people who run a business from home may have to pay business rates on the part of the property they use for business purposes. This will depend on: • How much of the property they use for business purposes. • Whether they have modified the property for their business. • Whether they employ people to work at the property. • Whether they sell goods or services to people who visit the property. Homeowners offering bed and breakfast (B&B) accommodation generally don’t have to pay business rates if all the following conditions apply: • The property is their sole residence. • They intend to accommodate no more than six people at any one time during the year. • B&B is a subsidiary use of their home. However, they must pay business rates as soon as their B&B business becomes a significant enterprise that uses more than half of their home, accommodates more than six people at any one time, or involves adapting the property for the benefit of B&B guests.
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The following types of non-domestic properties are exempt from business rates: • All agricultural land and buildings. • Fish farms. • Certified places of religious worship (including church halls) in England, Wales and Northern Ireland. • Properties in England and Wales used for the training or welfare of people with disabilities. • Properties in Northern Ireland used by charities for the public benefit or for charitable purposes.
How are business rates bills calculated? Employers must keep adequate records to prove that they have paid their employees the NMW. The National Minimum Wage Act 1998 does not define which records employers should keep. The way business rates bills are calculated varies in different parts of the UK. England and Wales In England and Wales, local authorities calculate business rates bills using the rateable value of the business property multiplied by a rate per pound known as the Uniform Business Rate (UBR). Various factors are taken into account when deciding a property’s rateable value, including its size and location, how it is used and the nature of the business. Two UBRs are set each year - the standard multiplier and the small business multiplier. The small business multiplier applies to firms that qualify for small business rate relief or that occupy non-domestic property with a rateable value below £51,000. The standard multiplier for 2019/20 is 50.4p and the small business multiplier is 49.1p. The City of London uses its own standard multipliers. For 2019/20, the Government has set two multipliers: the Small Business Non-Domestic Rate Multiplier of 49.1p and the National Non-Domestic Rate Multiplier of 50.4p. The City’s multipliers have been set at 49.7p in the £ for small businesses and 51p in the £ for other businesses. (The revenue raised by this supplement will help fund the Crossrail service.) In Wales, there is one UBR for all types of business, currently set at 52.6p for 2019/20. The Valuation Office Agency (VOA, www.gov.uk/government/organisations/valuationoffice-agency) determines the rateable value for non-domestic properties in England and Wales. Scotland In Scotland, local authorities issue business rates bills based on a national poundage rate multiplied by the rateable value of the property.
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In 2019/20, the national poundage rate is 49p for properties with a rateable value of less than £51,000. Firms that occupy premises with a rateable value of more than £51,000 will pay a higher rate of 51.6p. The national poundage rate is set annually by the Scottish Government. The Scottish Assessors Association (SAA, www.saa.gov.uk) decides the rateable value of properties in Scotland. Northern Ireland In Northern Ireland, rates for non-domestic properties are based on the rental value of the property, known as the Net Annual Value (NAV). This is determined by Land & Property Services (www.finance-ni.gov.uk/land-property-services-lps). Rates bills comprise a district rate decided by each local authority, and a regional rate fixed by the Department of Finance (www.finance-ni.gov.uk). The regional rate is set at 34.1p for 2019/20. Go to www.finance-ni.gov.uk/articles/poundages-2017-2018 for details about the district rates for 2017/18.
How is the rateable value determined? Rateable value is based on an estimate of the property’s rental value on the open market on a specific date. This figure may differ from the actual rent paid for various reasons, for example, the business may have negotiated particularly favourable rental terms. England and Wales The Valuation Office Agency (VOA) compiles business rating and council tax valuation lists for England and Wales and their officers decide the rateable valuations for their local areas. Each VOA officer gathers as much evidence as possible about actual rents paid for properties in their respective areas to determine an appropriate rental value. The VOA then prepares a summary valuation explaining how the rateable value of the business property has been calculated. These summary valuations provide a full breakdown of the rateable value calculation, based on the characteristics of the business property. Valuations are normally valid for five years and were last revalued in 2017. Scotland The SAA sets rateable values for non-domestic properties based on their rental value. The valuations are reassessed every five years. The most recent valuation took place in 2017. Northern Ireland In Northern Ireland, the LPS sets the net annual value for non-domestic properties based on their rental value. The valuations were re-assessed in 2015, based on rental values that applied on 1st April 2013. Go to www.finance-ni.gov.uk/topics/property-valuation/ valuation-lists for more information.
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Business Rate relief Small businesses and other types of organisation may be eligible for business rates relief in specific circumstances. In England, the mandatory relief is: • For business properties with a rateable value of up to £12,000, the rate of relief is 100% • For properties with a rateable value between £12,001 and £15,000 the rate of relief reduces on a sliding scale from 100% to 0%. • For properties with a rateable value between £15,000 and £51,000 the SBBR does not apply, but the small business rate multiplier is still used to calculate the properties’ business rates. Small business rate relief is normally granted for one property only. However, if the business ratepayer occupies additional properties, they may still qualify for the relief if both of the following conditions apply: • The rateable value of each additional property is less than £2,900. • The total rateable value of all of the properties does not exceed the upper limit for receiving SBBR. Other types of rate relief include: • Transitional relief • Hardship relief • Charitable rate relief • Rural rate relief • Enterprise zone relief • Empty property rate relief Please note: The £1,000 discount for Pubs with a rateable value of up to £100,000 ended on 31 March 2019. There are various business rates relief schemes that apply in England, Wales, Scotland and Northern Ireland with each being handled differently. In order for you to be able to apply you will need to contact your local council and further information can be obtain from Gov.uk (www.gov.uk/apply-for-business-rate-relief).
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Paying business rates Annual business rates bills are issued on 1st April for the year ahead. Businesses can pay in full or by monthly instalments. Business ratepayers in England, Wales and Scotland should contact their local authorities for details of payment options. Go to www.gov.uk/contact-your-local-council-aboutbusiness-rates to search for local authority contact details. In Northern Ireland, the LPS deals with business rate billing. Go to www.nibusinessinfo. co.uk/content/paying-your-business-rates for more information about paying business rates in Northern Ireland. If a business ratepayer fails to pay their rates bill, the local billing authority may take them to court to recover the debt.
Tips • Anyone who runs a business from home should check their liability for business rates with their local authority. • The UBR is assessed every year and fixed in line with inflation. Business ratepayers should keep up to date with these changes and check their business rates bill annually. • Ratepayers who wish to appeal against the rateable value of a property must do this as soon as possible. • Ratepayers who need professional advice about business rates can contact the Royal Institution of Chartered Surveyors’ consumer helpline who will put them in touch with a local surveyor. Go to www.ricsfirms.com for details.
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Useful contacts The Valuation Office Agency (VOA) assesses the rateable value of business premises in England and Wales. It publishes information and guidance about business rates. Tel: 0300 050 1501 (England) Tel: 0300 050 5505 (Wales) Website: www.gov.uk/government/organisations/valuation-office-agency The Scottish Assessors Association (SAA) publishes guidance and information on nondomestic property rating valuations for Scotland. Website: www.saa.gov.uk Land & Property Services (LPS) is the government department in Northern Ireland responsible for ratings valuations for business premises. It publishes information and guidance, as well as a valuation list of non-domestic properties. Website: www.finance-ni.gov.uk/land-property-services-lps The Royal Institution of Chartered Surveyors is a professional association for chartered surveyors. Their consumer helpline provides advice on business rates valuations. Tel: (024) 7686 8555 Website: www.ricsfirms.com
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