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Rates

As a leaseholder, you will be responsible for paying business rates (a contribution towards the cost of local authority services) on the space you occupy. 

 

How much will I pay in rates?

The rates you will pay are determined by the rateable value (RV) of the property.  The RV is the rent at which the property would be let on the open market on the valuation date. Properties are re-rated every five years, with the next revaluation due in 2017 (postponed by the Government from 2015).  You can find the RV of any property via the website of the Valuation Office Agency (VOA), for England and Wales, and of the Scottish Assessors Association (SAA), for Scotland.

You can appeal against the RV of your property if you believe that it is wrong.  You should first take this up with your local valuation office but if you cannot reach agreement, you can then make a formal appeal to the VOA.  Full details on the appeals procedure can be found on the VOA website.  A rating agent can help with this process but do choose your agent carefully, preferably through a recommendation, as the quality of the service can vary considerably.

Rates are calculated and collected by your local authority. You can work out the annual rates for the property by applying a ‘rateable multiplier’ to the RV (or a ‘poundage rate’ in Scotland). The multiplier or poundage rate determines the percentage of the RV which you will pay in rates and can be found on the VOA or SAA website, as appropriate.  The multiplier will usually change each year in line with inflation.

Discounts and reliefs

 You may be able to reduce your rates bill by applying to your local authority for one of the various types of rates relief.  The principal reliefs of interest here are:

Charitable relief: charities occupying commercial property qualify for a mandatory 80% discount on their rates bill, provided that the property is used wholly or mainly for charitable purposes (usually taken to mean at least 50% of the property). Local authorities also have a discretion to grant the remaining 20% as a further discount.  Community amateur sports clubs (CASCs) will be entitled to the same relief so long as the property is used wholly or mainly for the purposes of the club and other CASCs.

Not-for-profit organisations which are neither charities nor CASCs do not get the mandatory 80% relief but can, provided the property is used either for charitable purposes or other purposes which are for the general well-being of the community (i.e. sports, social, religious or educational), apply for discretionary relief of up to 100%.

Small business relief: until 31st March 2015, under a temporary but extended arrangement,  properties with an RV of £6000 or less will get relief of 100%, so business rates will not be payable on those properties.  Relief is then available on a sliding scale from 100% to 0% for properties with a rateable value of between £6001 and £12,000.  If you have more than one property the relief is still available so long as each of the additional properties has an individual RV of less than £2,600 and the combined value of all of the properties is below £18,000. The RVs of the various properties are added together and the relief is applied to the main property. If you don’t qualify for small business relief but your property has an RV of less than £18,000 your rates will be calculated using the small business multiplier instead of the slightly higher standard rate. Please note that different RV limits will apply to properties in Greater London.  

Empty property relief:  no rates are payable on empty property for the first three months (or six months for industrial buildings and warehouses).  Empty properties owned by charities or CASCs are exempt from paying rates so long as the property’s next use is likely to be wholly or mainly for charitable purposes, or the purpose of the CASC. 

Partly occupied property relief: the local authority has a discretion to grant relief where part of the property is unused for a short time.  If your application is successful and the local authority has apportioned the RV between the occupied and empty parts, you will only pay full rates on the occupied part of the property.

Transitional relief:  this is designed to reduce the impact of any significant changes in the RV and caps the amount by which your rates bill will go up or down.  It is automatically applied by the local authority but is only available in England.

The Government’s Autumn Statement 2013 announced a number of temporary measures which will benefit small businesses and those taking on new premises which have been long term vacant.  These include a 2% cap on any increase in business rates and a £1000 rates bill discount for certain small business owners.

The available reliefs are slightly different for properties in Scotland. Details can be found on the SAA website.