Q&A: Business Rates 2017 - Everything you need to know

Q&A: Business Rates 2017 - Everything you need to know

Date17 Feb 2017
Posted ByDavid Wills

There is shock and outrage in many English newspapers as it was revealed that thousands of businesses across the UK will see a dramatic increase in business rates from April 2017.

John Webber of real estate firm Colliers International, has described it as the "the largest changes to business rates ... in a generation".

To ensure no one is left behind, we’ve provided an at-a-glance list of everything you need to know about business rates in 2017.

What are business rates and who pays them?

Business rates are statutory taxes paid on commercial properties, such as shops, offices, pubs, warehouses, factories, schools, GP surgeries, holiday rental homes and guest houses.

Around 1.8 million properties in the UK are eligible for business rates. This accounts for the third biggest outgoing for many small businesses after rent and staff costs.

Any business with properties over the rateable value of £12,000 has to pay business rates. 

You’ll probably have to pay business rates if you use a building or part of it for commercial purposes.

How are business rates calculated?

The amount you owe will depend on your property’s ‘rateable value’. The Government’s Valuation Office Agency, works out your business rates bill by multiplying the ‘rateable’ value of the property with the appropriate multiplier (an amount set by central government). This happens every five years.

For 2016-17 the small business multiplier is set at 49.7p. So if your rateable value is £25,000 your annual charge will be £12,425 before any reductions.

  • Until 31 March 2017, the rateable values will be based on a valuation date of 1 April 2008.
  • From 1 April 2017, the rateable values will be based on the valuation date of 1 April 2015.

And if your property is eligible for business rates relief, your bill will be reduced.

What is the Valuation Office Agency (VOA)?

The Valuation Office Agency, is an executive agency of Her Majesty's Revenue and Customs (HMRC). Their work mostly involves compiling and maintaining ratings and council tax data for England and Wales. In Scotland this function is performed by the Scottish Assessors.

Why are business rates being revalued?

The Government reviews the rates every five years to bring them in line with inflation. They were last calculated in 2010 as the 2015 revaluation was delayed by two years. The new rate has been calculated using rental prices from 2015 and will come into force on April 1 2017.

How many business are affected by the new rates?

The revaluation will force 510,000 traders to pay more, 420,000 will see no change, and 920,000 businesses will have their rates cut.

What are the new small business rate reliefs for 2017?

You can get small business rate relief if:

  • your business only uses one property
  • your property’s rateable value is less than £15,000

Small business rate relief is on a sliding scale:

  • properties with a rateable value of up to £12,000 get 100% relief
  • for properties with a rateable value between £12,001 and £15,000, relief goes down gradually from 100% at £12,001 to 0% at £15,000
  • Businesses with a rateable value between £15,000 and £51,000 are still considered a small business and can pay lower rates, even if you don’t get small business rate relief.  This is because your rates are calculated using the small business multiplier.

You will need to contact your local council to apply for small business rate reliefs.

Who is exempt from paying business rates?

Agricultural land and buildings are exempt unless they are used for commercial activities.  Some non-residential properties like fish farms and places of religious worship — such as registered church halls — are also excluded.

The rates do not apply to buildings used for the training or welfare of disabled people. Amateur community sports clubs and charities can apply for tax breaks up to 80 per cent if a property is used for charitable purposes.

Certain types of properties such as a last or only post office, shop, pub or petrol station in a rural settlement with a population below 3,000 may be entitled to the rural rate relief. Of course, these need to be under a certain ‘rateable’ value.

Are business rates payable if the property is empty?

You don’t have to pay business rates on empty buildings for 3 months. After this time, most businesses must pay full business rates. However, these properties can get an extended empty property relief:

  • industrial premises (eg warehouses) are exempt for a further 3 months
  • listed buildings - until they’re reoccupied
  • buildings with a rateable value under £2,600 - until they’re reoccupied
  • properties owned by charities - only if the property’s next use will be mostly for charitable purposes
  • community amateur sports clubs buildings - only if the next use will be mostly as a sports club

Do I have to pay business rates if I work from home?

If you work from home, then it is possible that part of the property used for work should be assessed for business rates, while the rest of the property is assed for council tax. The VOA will make the final decision.

What happens if I don’t pay business rates?

Business rates are payable by up to 10 monthly instalments. Your bill details the amounts you must pay and when they are due.

If you don’t pay at the correct time, you will receive a reminder. If you don’t pay the amount within 7 days of the reminder, you will have to pay the whole amount you owe for the year in one instalment. But if you pay within 7 days, no further action will be taken.

If you pay the amount on the first outstanding notice, but fail to pay again on time, you will be issued a second reminder. You will have 7 days for the account to be brought up to date for the amount in the notice. If you fail to pay this amount within 7 days, you will lose the right to pay by instalments and the full amount becomes due and summons are issued. But if you pay within 7 days and then pay all other instalments on time, no further action will be taken.

If you miss again a final notice will be issued, and your right to pay by instalments will be lost and the full balance must be paid within 7 days.  If you fail to pay in accordance with the final notice, a court summons will be issued.

How do I appeal business rates?

If you think you have the ground to appeal, you will have to appeal to the VOA. However, you must continue to pay the rates during the appeal.  After this you can take your case to the Valuation Tribunal, if you still don’t agree to the rateable value.

More information about Business rates is available from gov.uk.