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%.
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
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.