What is Business Rates Tax?
If you use a building or part of a building for non-domestic purposes, you will be familiar with the business rates tax which is charged on your business property whether it is a shop, office, pub, warehouse, factory, holiday rental home or a guest house. The amount of business rates tax you have to pay depends on the rateable value of your business’ property. The rateable value is calculated by a formula set by the Government and the Valuation Office Agency (VOA). Your local council can tell you what the rateable value of your property is and how much you have to pay towards your business rates tax.
Can I get a discount on the amount of Business Rates tax I have to pay?
You might be eligible to apply for business rates relief against your property. Some of the reliefs which might be available to you include:
- Small business rate relief;
- Rural rate relief;
- Charitable rate relief;
- Enterprise zone relief; and
- Hardship relief.
A rates relief could entitle you to a discount on the amount you have to pay towards your business rates tax depending on whether you satisfy the relevant criteria. To obtain a business rates relief you should, in the first instance, look on your local council’s website or contact your local council for information on how to apply for business rates relief. It could be as simple as filling out a form!
What is Small Business Rates Relief?
If you own your own business, then small business rates relief is the most common type of relief which may be applicable to you.
You can apply for small business rates relief if your property’s rateable value is less than £15,000. The amount of reduction you get depends on the rateable value of your property. If your business property has a rateable value of £12,000 or less, then you will not pay any business rates at all and a 100% exemption applies.
If your business property has a rateable value between £12,001 and £15,000, then the relief is tapered against your tax liability. So for example, if the rateable value of your property is £13,500, then you will be eligible to get 50% off your tax bill.
How do I apply for Small Business Rates Relief?
You should check your local council’s website for details about what you need to do in order to apply for the relief and to confirm whether there are any other specific requirements for the relief to apply.
The application process itself can be as easy as downloading the relevant form and filling in the details yourself.
You should be aware that although the relief is an “automatic” exemption/ reduction on your business rates, you might still be required to apply for the relief directly with your local council otherwise your local council might not know to apply it against your tax.
To find your local council, please go to this website and enter the postcode of your business property: https://www.gov.uk/find-local-council.
I have been approached by a rates reduction company – what should I be aware of?
Some companies offer to reduce your business rates for you for a commission. These companies advertise that they will apply for small business rates relief on your behalf. However, as detailed above, you might already be eligible to receive a reduction or an exemption on your business rates depending on the rateable value of your property.
If you instruct a rates reduction company, the danger is that you might be tied into a contract with them and have to pay charges for as long as five years (or possibly longer) even though you are already entitled to small business rates relief. There is a risk that the work you are being charged for may be as little as the company filling out a form on your behalf and submitting it to your local council – this is something that can be easily achieved yourself and the commission costs saved.
It is advised that you read the wording of the contract carefully before signing up to any agreement in order to avoid any pitfalls. The small print might expressly state that you agree to pay a percentage of the reduction achieved on your rates. The contract could also state that the company is entitled to charge fees regardless of how your relief came about whether automatically applicable or not.
The lesson is to double-check: a) your business property’s rateable value; b) whether the relief applies to you, and c) what your council’s website says. If you are going to instruct a rates reduction company then you should clarify with them exactly what service they will be providing to you. It is vital that you read the contract carefully so that you don’t fall into an expensive but avoidable trap.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.