BUSINESS RATES – A BRIEF GUIDE

Business rates can be a real cost to retail businesses and a lot of rural retailers do not really understand the system. This is a brief summary of the way it works and how it is changing. Many small businesses do not claim reliefs to which they are entitled and hence miss out on this help. In particular, some
RSA members may be eligible for Small Business Rate Relief that they are not claiming.

How Business Rates are calculated

The national non-domestic rates (NNDR), commonly called business rates, are collected by local district councils or unitary authorities. However, their level is set by central government for the entire country, with local councils at present having no discretion over them.

Apart from some exempt properties, each non-domestic property has a rateable value set by the valuation officers of the Valuation Office Agency (VOA). This rateable value is intended broadly to represent the yearly rent the property would attract if let on the open market on a particular date. The actual non-domestic rate is calculated by multiplying the rateable value by the national non-domestic rate multiplier, a figure that is set each year by Central Government. The multiplier for 2009-10 has been set at 0.485. So a property with a rateable value of £10,000 will pay 0.485 x £10,000 = £4,850 business rates in tax year 2009-10.

This multiplier has been increased by 5% over 2008-09, a real blow to many businesses experiencing very tight trading conditions and little scope to pass this increased cost onto customers.

Rates relief for rural shops & post offices

Mandatory relief of 50% off the business rates is given to large numbers of rural retailers. To qualify for 50% mandatory rate relief, the property must:
• Be in a qualifying rural settlement of 3,000 people or less
• Be a food shop or be used, in whole or in part, as a general store or a post office and have a rateable value of not more than £7,000
• Be a public house or a petrol filling station and have a rateable value of not more than £10,500
• Be either the only general store, the only post office, the only public house or the only petrol filling station in the settlement but not necessarily the only food shop
Shops that meet these criteria can also be granted up to a further 50% discretionary relief. Whether this is granted depends on the local authority – some are very generous whereas others are the complete opposite. You may need to re-apply for the discretionary relief each year.

Small Business Rate Relief

In England small businesses are generally entitled to Small Business Rate Relief if the rateable value of their premises is less than £15,000 (£21,500 in London).
If the rateable value of the property is less than £5,000, the business rates are reduced by 50%.
If the rateable value is from £5,000 to £9,999, the reduction decreases on a sliding scale of 1% for every £100. For example, if the rateable value is £7,500, the rates are reduced by 25%.

2010 Rating Revaluation

New rateable values for all commercial property will come into effect on 1 April 2010 in England.

Every 5 years the government adjusts rateable values for businesses to re-align them with the changes in property prices within the commercial market. Assessments for the 2010 valuation will generally be based on key rental values as at 1st April 2008 and will determine your rate liability for the period 2010 to 2015. It will come as no surprise that most valuations are expected to go up, the exact figures varying across the country depending on the state of the local commercial property market. This work is carried out by the Valuation Office Agency.

Given the state of the economy, the property market in April 2008 was very different from the picture likely in 2010 and some real anomalies are likely to occur. If you think you may have grounds for appeal, it may be worth taking local professional advice – although of course it will cost you to do so. You should receive your new business rateable value in September this year and you then have 6 months to check the accuracy of the rent data used to calculate it. The formal revaluation notice will then be sent out in March 2010, to take effect from April 1st.

It is vitally important to look closely at this revaluation when it happens if your rateable value is just above one of the thresholds for relief schemes.


The Business Rates Supplements (BRS) Bill

This new law is currently passing through the committee stages in Parliament. It has been drafted in response to The Lyons Enquiry into Local Government published in 2007 and is intended to allow local authorities to impose a supplement to the normal rates bill to pay for infrastructure “to support long-term economic growth in their areas”.

The good news is that properties with a rateable value of £50,000 or less will not have to pay the supplement, so as things stand at present the vast majority of rural retailers will be exempt from it.

More information

This can be a complex area and we can only provide a broad outline of the system. Your first port of call for more detailed information will usually be your local council rates department – their contact details will be on your rates demand. Guidance is also available on Business Link websites.

To find your rateable value:
http://ratinglists.voa.gov.uk/irl2k5/mainController?action=InitialiseApp&listYear=2005&lang=E

Information on appeals on rateable values:
http://www.voa.gov.uk/business_rates/2005AppealsFAQs.htm