Business rates advice for tenants
Business rates can be complicated and costly, and no one likes paying more than they should.
Who pays business rates?
Business rates are payable on most commercial properties, both occupied and empty. The person entitled to possession of a property is liable to pay business rates charges, this will usually be the occupier or leaseholder or the owner of the property if unlet.
How are my business rates for my premises calculated?
Business rates are based on the Rateable Value (RV) of a property. The RV is the Valuation Office Agency’s (VOA) estimate as to the rental value of the property at a fixed valuation date.
The Government carries out a Revaluation of all business rates assessments typically every five years. The most recent Revaluation was carried out on the 1st April 2017, with a fixed valuation date of 1st April 2015. Find out more about the next Revaluation here.
To calculate your annual bill, the RV is multiplied by the Uniform Business Rate (UBR) which changes each year with inflation. The current UBR is 0.512, so a property with a Rateable Value of £100,000 would give rise to an annual rates bill of £51,200 (£100,000 x 0.512).
What is occupation?
Occupation for rates isn’t necessarily the date that that a business starts to operate from the premises. It can depend on when stock or goods were first moved into the premises.
In most cases the occupier of the premises is responsible for paying business rates. This will usually be the owner occupier or the tenant occupier.
On occasion a landlord may charge a rent that is inclusive of business rates. In this case the landlord and occupier decide who is responsible to make payment, but the occupier remains liable for payment, and the bill is issued in their name.
Unoccupied properties are subject to business rates charges unless a business rates relief applies. In cases where empty business rates are due, the person or company entitled to possession will be liable for the empty charge.
Business rates are not payable in the first three months that a property is not occupied, extended to six months for certain industrial properties. After this period rates are payable in full.
There are several exemptions from the unoccupied property rate and any exemption is based on the property’s circumstances, rather than the liable party. If a new owner takes over a property that has already been unoccupied for over three months (or six months if industrial) and it remains empty, the 100 per cent unoccupied rate is charged immediately. Similarly if a tenant signs a lease on a new property they will only be entitled to whatever remains of the exemption.
There are certain circumstances where empty rates are not payable, even beyond the void period
Empty Rates is a specialist area, and it is always advisable to seek the guidance of an expert to discuss the options available if your property is unoccupied to mitigate any costs.
How do I know if I'm paying the right amount of business rates?
It’s vital you check, on a regular basis, that you are paying the correct amount of business rates.
You can check the Rateable Value of your property set by the Valuation Office Agency and used by your local council to calculate your business rates bill on the VOA website. You can also request changes to property or valuation details if you think they’re wrong, view the valuation details of other properties and challenge the Rateable Value if eligible.
Checking regularly will ensure you continue to benefit from any additional grounds on which to achieve a saving, such as changes in the locality like disturbance from adjoining building works or road works.
For peace of mind Altus Group offers a free, no obligation business rates check – all you need is a copy of your business rates bill. Check here.
Can things happening outside of my property affect my business rates bill?
Yes! The technical term is a ‘Material Change in Circumstances’ (MCC) – a physical change in the locality which may be cited as a reason to alter an existing assessment in the Rating List, leading to a change in Rateable Value following a Valuation Office Notice or a ratepayer proposal.
A MCC gives rise to fresh and specific grounds of appeal against an entry in the Rating List, which is why it’s so important to regularly assess the business rates you pay or engage with a rating agent who can monitor on your behalf.
How can I achieve a reduction in my business rates?
If the Rateable Value for your premises is incorrect, and you think you are paying too much in business rates, you can ask for your property’s Rateable Value to be corrected by the VOA.
Business rates are a complex area, and although it is possible for individual businesses to check and challenge their own RV, it is often advisable to engage with a reputable rating agent. The legislation and associated processes can be complicated, and professional Surveyors backed with a strong data capability are best placed to achieve the best possible results.
It is wise to ensure any commercial property consultant you choose is aligned with leading professional bodies for qualifications, standards and best practice in property and rating. The Royal Institution of Chartered Surveyors, the Institute of Revenues, Rating and Valuation or the Rating Surveyors’ Association.
Always ask for a clear breakdown of the fees you will be expected to pay and never pay any fees upfront. No win no fee business rates specialists’ interests are fully aligned with their client and where the fee is a percentage of the money saved, there is no business risk.
I've moved out of my premises - do I still need to pay business rates?
If a tenant vacates a property but does not surrender the lease for a further six months, the tenant remains liable to pay any unoccupied rate charge applicable.
When the tenant’s lease ends, the landlord will be required to pay any business rates charges.
What happens when I challenge my business rates?
The landscape for challenging business rates changed dramatically from April 2017 onwards. The Government introduced a system called “Check, Challenge and Appeal” (CCA). This three-stage process requires a detailed valuation case for a reduction to be made much earlier in proceedings and unlike previous appeal regulations requires the appellant to confirm physical changes to the premises.
Challenging your business rates can be confusing and time consuming.
Altus Group can make this process straight forward and easy to understand by acting on your behalf – ensuring that you benefit from the maximum saving possible.
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Final thoughts: as a tenant there are a few things to consider.
Many businesses are unaware that their RV could be incorrect, and they could reduce their rates bills.
As assumptions are made at Revaluation to assign a RV to your premises, it is advisable to check that the RV is correct, and you are paying the right amount, as a refund could be backdated to April 2017.
If you engage with a no win no fee business rates agent and they find your RV is correct, you can have peace of mind that your business rates bill is correct at no cost.
The Rateable Value is often first entered into the Rating List incorrectly. A speculative building finished to practical completion is not complete for rating purposes unless the billing authority has served a Completion Notice.
Responsibility for serving a completion notice sits with each Local Authority, rather than the Valuation Office Agency. This often creates inconsistency from Local Authority to Local Authority.
Even when served, many notices can be successfully challenged. Specialist Empty Rates Surveyors can provide further advice and guidance.
Premises undergoing alternation/improvement
Each project is different, as a scheme of works can range from a demolition and major redevelopment to more cosmetic dilapidation and repair works.
If you are planning any works to your premises, from fit-out to major reconstruction, it is advisable to seek strategic guidance around the opportunities for deleting or zero rating the assessment. Seeking advice at design stage for refurbishment and redevelopment projects is often critical, and the timing of an appeal can also be key in determining the outcome.
Seeking professional advice
It is advisable to seek professional advice when looking to make changes to any property, in addition to talking to your landlord.
Always ask for a clear breakdown of the fees you will be expected to pay and never pay any fees upfront.