Business rates explained
Business rates are payable by the occupiers of non-domestic property such as offices, shops, warehouses and factories in England and Wales. Here we consider the current rules as well as some of the changes that may be in the pipeline.
The rateable value
The amount of business rates payable depends on various factors, including the rateable value of the property, the multiplier, and whether the business is eligible for rate relief.
The rateable value of the property is set by the Valuation Office Agency and represents the open market value of the property. Properties are revalued every five years and the valuation date is two years before the revaluation date.
The second component of the business rate charge is the multiplier (also known as the uniform business rate), which is set by central Government. The multiplier is the percentage (or pence in the pound) of the property’s rateable value that is payable in business rates. The standard multiplier for 2010/11 is 41.8p in the City of London, 41.4p in the rest of England and 40.9p in Wales.
Small business rates relief
Relief is available for properties with a low rateable value. A lower multiplier, known as the small business rates multiplier, applies to properties with a rateable value of less than £18,000 (or less than £25,500 in London). For 2010/11 the small business multiplier is
41.1p in the City of London and 40.7p elsewhere in England. In Wales slightly different rules apply.
In calculating the business rates for a property with a rateable value of £6,000 or less, the small business multiplier is reduced by 50% prior to 1 October 2010. The reduction is increased to 100% from 1 October 2010 to 30 September 2011, removing the business rate charge during this period.
Tapering relief is available where the 2010 rateable value is between £6,001 and £12,000. Prior to 1 October 2010 the tapering reduced the bill on a sliding scale with a 50% reduction applying to properties at the low end of the band, reducing to zero for properties with a rateable value of £12,000. From 1 October 2010, the relief is doubled so that the tapering applies from 100% to zero. Business rates for properties with a rateable value of £12,000 or more, up to £17,999 (or £24,999 in London) are calculated by reference to the small business multiplier without reduction.
All properties are exempt from business rates for three months after the property becomes vacant. However, for 2010/11 the three month limit does not apply where the rateable value of the empty property is £18,000 or below. The exemption threshold is expected to be reduced from April 2011.
Legislation is being introduced in the Localism Bill to end the legal requirement for businesses to fill in an application form to claim rate relief. Instead, it is proposed that the small business rate multiplier will be automatically applied to eligible fi rms.
Secondary legislation will also be amended to ensure that all eligible ratepayers below the £18,000 (£25,500 in London) rateable value threshold have their bills calculated using the small business multiplier, regardless of the number of properties that they occupy. The legislation applies to England only.
In addition, the Bill also proposes giving firms the power to hold a ballot before any Business Rates Supplement is introduced. Since April 2010 councils have had the ability to add up to 5% to business rates bills to fund local projects.
For further advice please contact us.