There are many rules, regulations and taxes to keep on top of if you run a business, and one of the most important is the business rates you will have to pay.

What are business rates?

Business rates are also sometimes known as non-domestic rates. This is a tax that has to be paid by anyone who is responsible for a commercial property. That means that if you are an occupant of a building or part-building, and that occupancy is for a non-domestic use, you are likely to be liable to pay business rates.

How are business rates collected?

The tax is levied and collected by your local council. They send out bills for business rates to all relevant properties each year. How much you will be required to pay will depend on what is known as the ‘rateable value’ of the property you occupy.

What is revaluation?

The rateable value of the property is based on its rental value on April 1, which is set by the Valuation Office Agency (VOA). Previously this rental value was re-examined every five years in a process known as revaluation. At the same time as revaluation, the government makes adjustments to the level of business rates, in order that they properly reflect any changes in the UK housing market. In the last two years, there have been two revaluations, and that has caused some uncertainty and difficulty for businesses.

Recent changes

In 2017, the UK government undertook a major revaluation, and, unusually, followed this with another revaluation this year. Both revaluations have led to significant changes in the level of business rates. The Federation of Small Businesses has warned that many of its members could face significant difficulties as a result of increasing business rates bills; although some businesses have said that they support more regular business rate revaluations.

According to the government, around 510,000 businesses have seen an increase in business rates during 2018 while 420,000 will remain at the same level and roughly 920,000 will enjoy a business rate decrease. The government has also announced that the next business rates revaluation, originally scheduled for 2022, will take place in 2021.

Are there any applicable discounts with business rates?

There are some circumstances in which properties may qualify for discounts, which can be deducted from business rates. The most common discount is for charitable organisations, but there can sometimes be discounts in the case of properties situated in sparsely populated rural areas, for those small businesses that only utilise one property for which the rateable value is less than £12,000 or for businesses located in Enterprise Zones.

Important changes that can affect business rates

There are a number of factors that can affect your business rates and it is crucial to notify the VOA about any material change, in order to avoid ending up with a bill that is larger than it should be. Material changes include alterations to the property itself, to the way that the property is used, or to the local area. This latter category can include significant new local developments or changes to roads and access routes.

What if you do not agree with your valuation?

One option is to take professional advice. RVA Surveyors are one of a number of companies that can help business owners ensure they are paying the correct rates. If required they can also help them through the process of challenging the rateable value that has been set on their business.

And there are things that you can do to address incorrect or unfair business rates. For instance, it is possible to lodge an appeal against the rateable value that has been assigned to your property for a number of reasons. That can apply if:

  • The valuation is wrong
  • A change in your area or property is not shown in the rateable value
  • Your property has been incorrectly split into more than one category
  • Your property has been incorrectly joined with others

Changes in business rates can have a major impact on your business, particularly in an area of high and rapidly rising property values as has been seen in London. That is why it is important to review the draft valuation of your property that the VOA makes available online and to get in touch with them as soon as possible, before your council uses the valuation to work out your business rates bill. While there is recourse to challenge incorrect bills at a later date, the earlier you raise objections, the easier it is to get the correct bill, and to take any necessary action to protect yourself from the consequences of business rates changes.