It is probably the hottest topics for many businesses in the UK in 2017: The most recent businesses rates revaluation. Our guide will answer the most pressing questions for everyone whose business is affected by the new rates.
What are business rates and why do I have to pay them?
You receive business rates bills if you own, rent or occupy property that is used for business purposes, for example, offices, shops, pubs, restaurants, hotels, warehouses or factories.
Business rates are essentially an annual tax on business property. They are set by the government but collected by your local council as a contribution to the cost of local council services.
How are my business rates calculated?
Unlike most other taxes that your business has to pay, business rates aren’t based on your turnover or profits. They are based on the rateable value of the building or the part of the building your business uses.
The rateable value is estimated by a local assessor based on the annual rent that your property could have achieved on the open market at a certain point in time. All property values are always assessed on the same date.
To calculate your business rates bill, the government sets a multiplier that is applied to your rateable value. This multiplier is called “poundage” and basically determines how many pence per pound of rateable value you have to pay. The poundage is updated every year and can increase no more than the increase in the retail price index.
The standard poundage for 2017/18 can be seen below:
Rateable value <£51,000
Rateable value £51,000+
Why and how do my business rates change?
The rateable value of your business property is periodically reassessed and adapted in order to reflect changes in the property market. This is called revaluation and is usually conducted every five years by the Scottish Assessors Association if your property is located in Scotland, or the Valuation Office Agency, if you are based in England.
A revaluation scheduled for 2015 was postponed until this year, which is why the new rateable value of your property is based on the rents achieved on 1st of April 2015. This postponement, as well as two years of additional rental growth, mean that the rateable value and consequently the business rates have risen dramatically in certain sectors and regions, although for others they have remained the same or even fallen.
Many businesses operating in Aberdeen City and Aberdeenshire are facing business rate increases of 200% or more. Hotels, pubs and other hospitality businesses have even expressed concerns to go bankrupt.
Revaluation notices were sent out in March 2017 and the updated rates officially took effect from 1st of April 2017. Some notices may be sent later, so if you haven’t received a letter yet, you can access the current rateable value of your property here saa.gov.uk.
Is there anything I can do?
No matter if your bill has increased or decreased, the least you should do is check that the rateable value stated is perfectly accurate. If you think that your bill could be too high, your rateable value is the only contributing factor that you can challenge.
The appeals process started on the 1st of April 2017 , and you can challenge your business rates until including the 30th of September 2017. It is important to keep in mind that all appeals will only be completed by the end of 2019.
You should also find out if your business qualifies for a rate relief or exemption. There are general reliefs for small businesses in Scotland and England up to a certain rateable value:
100% 100% 25% Between 100-0%
Premises that belong into the following categories are generally exempt from business rates:
- places of public religious worship
- agricultural land and buildings
- fish farms
Many areas that have been hit especially hard by the new rates have achieved specific short-term transitional reliefs for certain sectors. Check your local Chamber of Commerce and local Council website for more details. Those reliefs will not be applied automatically and you will have to apply for them.
The Scottish Government has announced a short-term transitional relief scheme for properties in the hospitality and office sectors for Aberdeen City and Aberdeenshire. Furthermore, Aberdeen Council have announced a scheme to support companies across all sectors that do not qualify for reliefs if there rateable value is below £120,000 – Aberdeen & Grampian Chamber of Commerce
What if the rates relief schemes don’t apply to me (or do not make much of a difference)?
We found that many of our clients simply have to find other ways to compensate for additional costs caused by business rates increases. The easiest and quickest way to reduce your overheads is to review what you are currently paying for your energy, water and telecoms. With the help of experts like eyebright, you can probably offset the additional costs by finding cheaper rates for your utilities.
If you would like to know more, simply get in touch with us and so we can find out together how we can help your business.