That’s a Relief! Business Rates And Special Situations

Sarah Bradford looks at business rates and some of the reliefs available. 

Business rates are paid to the council on most non-domestic premises, such as offices, shops, factories etc. The rates are determined by multiplying the rateable value of the property by the rates multiplier set by central government. Properties are valued by the Valuation Office Agency.

Certain properties are eligible for business rates relief. There are various different types of reliefs, including:

Special rules apply to certain types of business, including pubs and self-catering and holiday let accommodation. 

Business rates may also be payable in some circumstances where a business is run from home.

This article looks at situations in which relief may be available and the special rules that apply to certain types of business.

Business rate help is available to small businesses. Small business rate relief is available to businesses which use only one property and which has a rateable value of less than £12,000. Full relief is available until 1 March 2015 where the rateable value is less than £6,000, meaning no business rates are payable. Where the rateable value of the property is between £6,001 and £12,000, the relief gradually decreases from 100% to zero.

However, he must claim the relief from the council. 

Businesses with a rateable value of less than £18,000 (or £25,500 in Greater London) that do not qualify for relief are still considered small and their business rates are calculated by reference to the lower small business multiplier. 

Small business rate relief must be claimed.

Businesses may be situated in a rural area with a population of less than 3,000. Relief is available to a business that is the only village shop or post office with a rateable value of up to £8,500 or the only public house or petrol station with a rateable value of up to £12,500. The relief is at a rate of 50%, although councils can top it up to 100%. Councils also have the discretion to give relief of up to 100% to other rural retail business with a rateable value of less than £16,500.

Where a property is used for charitable purposes, relief of up to 80% may be available. Some councils provide a discretionary top up to take the relief up to 100%.

To encourage businesses to start up or relocate to an enterprise zone, businesses in enterprise zones are eligible for relief. The relief is valuable – up to 100% for five years up to a maximum of £275,000. However, the business must start up in or relocate to an enterprise zone by April 2015. 

Certain properties are exempt from business rates, in particular, exemptions are available for agricultural land and buildings (including fish farms), buildings used for the training or welfare of disabled people and buildings registered for public religious worship and church halls.

Empty properties 

Properties that are empty escape business rates for a period of three months, after which full business rates are usually payable. However, certain types of property are able to enjoy empty property relief for a longer period. Industrial premises, such as warehouses, are exempt from business rates for a further three months (i.e. six months in total) when empty. Empty listed buildings and buildings with a rateable value of less than £2,600 do not pay business rates until such time as they are reoccupied. 

Extended business rate relief is also available for charities as long as the next use of the building is predominantly charitable, and for community amateur sports clubs as long as the next use is mostly as a sports club.

Different rules apply to set the rateable value of pubs and buildings used in the licensed trade for business rate purposes. The rateable value is based on the annual level of trade that the pub is expected to achieve if it operates in a reasonably efficient manner. This is known as `fair maintainable trade’ and is based on the type of pub or licensed premises, the area in which it is situated, and the services that if offers. In working out the `fair maintainable trade’ the Valuation Office Agency also looks at rents and turnovers. A percentage, as agreed with the British Beer and Pub Association, is applied to the fair maintainable trade to arrive at the rateable value. Business rates are paid by reference to the rateable value determined in this way. 

Properties that are situated in England and available to let for 140 days or more in a year are treated as self-catering accommodation and are therefore liable for business rates. Different rules apply in Wales; to be liable for business rates the property must be both available to let for 140 days a year and actually let for 70 days or more. In England there is no requirement that the property is actually let, such that business rates apply as long as the property remains available for letting for 140 days or more.

Where business rates are in point, the rateable value is found by applying a price per bed space on each property, which reflects its type, size and location. The bed space measure reflects how many people can sleep in the property.

Many people work from home. Depending on the nature and type of business and the extent to which the home is used for business purposes, business rates may be payable instead of council tax on that part of the home used for business purposes. The remainder of the home remains liable to council tax. In deciding whether business rates apply, various factors are considered, such as the extent and frequency of the business use of the room or rooms used for business and any modifications made to those rooms to accommodate the business use. Where business rates are in point, a rateable value is assigned to the non-domestic part. The business rates are based on the rateable value.

When setting up a business from home, do not overlook the possibility that business rates may be due, particularly if changes are made to the property to enable the business to operate from home. Planning permission for change of use may also be needed. Advice should be sought.

However, basing a business from home will not automatically mean that business rates are due, particularly if the business is run from a room also used for domestic purposes (for example a person who works on the dining room table during the day and uses the room for family meals in the evening). Where business rates do apply to a business that is run from home, the rateable value is likely to be low and small business rate relief may be in point.

Remember to claim small business rate relief if due.