It is common knowledge that council tax is payable for residential homes to local councils. The business equivalent of that is business rates, which are payable to local councils on properties that are occupied for non-domestic purposes, i.e. shops, restaurants, offices etc.
Business rates can vary each year, and sometimes quite substantially, so it is important to understand how they are calculated.
Business rates are based on the ‘rateable value’ of the relevant property. This is estimated by the Valuation Office Agency and usually revaluated every five years. Rateable values are currently an estimate of what the open market rental value of properties were in April 2015.
To calculate the business rates payable on a property, its rateable value is multiplied by a figure known as the ‘multiplier’, which is set by government each year. In 2017, the standard multiplier is 47.9p.
For example, the business rates payable on a property that has a rateable value of £70,000 is calculated by £70,000 x £0.479 = £33,530, per annum payable to the local council.
Government provides several forms of relief, which small businesses may be eligible for.
Small businesses can exclusively benefit in two ways:
1. Small business multiplier: the rateable value can be multiplied by a smaller figure of 46.6p
As long as your property’s rateable value is below £51,000, the multiplier will be 46.6p.
For example, the business rates payable on a property that has a rateable value of £50,000 is calculated by £50,000 x £0.466 = £23,300.
2. Small business rates relief:
a) Properties with a rateable value of £12,000 or less
If your property’s rateable value is £12,000 or less, you are eligible for 100% relief, which means you do not need to pay any business rates.
b) Properties with a rateable value between £12,000 and £15,000
If your property’s rateable value is between £12,000 and £15,000, the percentage relief you receive is proportionate to a sliding scale from 100% to 0%.
For example, the midpoint between the range of £12,000 and £15,000 is £13,500 and, therefore, the relief on a property with a rateable value of £13,500 would be 50%.
The business rates payable on that property would be calculated by £13,500 x £0.466 = £6,291. A 50% relief would then be applied to that total, leaving £3,145.50.
c) Occupying more than one property
You may still qualify for small business rates relief; however, each of your additional properties must have a rateable value of less than £2,900 and the aggregate of the rateable values of all your properties must be lower than £28,000.
If you no longer qualify for small business rates relief after occupying a second property, you can still receive your existing relief on your main property for another 12 months.
If you think you qualify for small business rates relief, you must submit an application to your local council.
Note: if your business qualifies for another type of mandatory relief, you may not be able to use the small business multiplier nor qualify for the small business rates relief.
Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.
For further information, please contact Paul Jagger