With business property you have to pay business rates for your property as opposed to council tax with a residential property. Larger businesses tend to be used to these and factor them in with other property costs, whereas smaller and new businesses often don’t even realise they exist, and even if they do, they don’t necessarily realise how they should be correctly calculated and charged.
I have recently been involved with a charity agreeing lettings to small local businesses, and it helped to break down this whole business-rates process into elements. The good news for them and in fact a lot of small businesses is that the eventual rates cost can be zero or at least dramatically reduced after the government initiative to help encourage small businesses, however there is a still a process to go through to reach this end-goal. So here goes, the basic 3-step process:
1. The Valuation Office (VO) First Issues an Assessment
This is the national government body that determines what your area is worth rates-wise, by giving it a Ratable Value (RV) which is basically meant to mirror what the 'market rent' is for your area. You can then view these online, and see a breakdown of how they have arrived at this final value - click here to find out.
2. The Local Authority Then Issues a Rates Bill
Your local council then raises the actual business rates charge to you once they know what your ratable value is from the VO. The calculation involves a multiplier and you can sometimes see different transitional reliefs, but the end charge is usually just under half your rateable value.
This is raised as a one-off annual invoice from April one year to March the next to fall in line with the standard rates year, although the councils will look at payment plans on, say, a monthly basis.
3. A Small Business Rates Relief application Can be Made to Reduce End-Costs
The final stage is applying for this reduction, and even though it might mean you are left with zero end cost you still have to do this after first receiving the normal above charge. If agreed, the council will then send a credit note to cancel or reduce the above rates bill.
In terms of being eligible for this, firstly make sure your RV is within the Small Business Rates Relief limits which often change from year to year, currently being under £12,000. Secondly, you must make sure that the rate paying name is not already paying rates elsewhere, including other parts of the country, as this will dilute your eligibility.
So as an example, if you have a business in the name of ABC Builders and you have other rate-paying property, then both together may go above the threshold and mean you need to pay rates. Alternatively you could look at occupying in a different name, although only if this is the true situation and mirrors other things like the lease name.
In the rush of a new occupation it can be promised that you don't have to pay any business rates, which may well be the case for small businesses who can benefit from the helpful Small Business Rates Relief government initiative. Watch out though for these three steps that you still need to go through and the administration with the local authority to eventually get there.
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