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Guide to business rates - commercial property

If you occupy a commercial property you are almost certainly liable to pay business rates on that property. Business rates are a tax based on the rateable value of the commercial property, which in turn reflects the rental value of that property. 

This is just a summary of business rates and how they are enforced; the legislation surrounding business rates can be complex. The best way to ensure that your commercial property is given the correct rateable value, and is therefore assigned the correct level of payable business rates, talk to a commercial law specialist at Stephensons on 01616 966 229.

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Calculating business rates

Most commercial properties will be assessed and given a rateable value (RV). The RV of a property will generally be set by the Valuation Office Agency of HM Revenue and Customs. The business rate of a particular property is calculated by multiplying the RV of a property by the Uniform Business Rate (UBR). 

For the 2013/14 financial year, the UNR has been set at a level of £0.462. So, if your property has an RV of £15,000, this will be multiplied by the UNR to give £6,930; this is the total business rates you are liable for.

There are certain supplements and special rates that may also be added onto your business rates. For instance, properties in London with an RV above £25,000 may have to pay a supplement, which goes towards funding the small business rate relief (see below).

Paying business rates

Occupiers of commercial properties will generally receive a rate demand from their local billing authority in April, and you will have the option of paying business rates in ten monthly instalments. Business rates should be paid by the occupier of the property; if you are a tenant, check with your landlord whether business rates are included in your lease. 

Empty/partly occupied premises

If a property is empty, there is no liability to pay business rates for the first three months, or six months for warehouses and industrial properties. After this period, empty properties are liable for 100% of the business rates, unless the property is a listed building, or has an RV below £2,600.

For partly occupied properties, it is at the discretion of the local billing authority whether to grant a business rate relief. 

Business rate reliefs

Premises occupied by charities are entitled to an 80% mandatory business rate relief, while non-profit organisations can apply to the local billing authority for discretionary relief of up to 100%. There are additional business rate reliefs available for small businesses, such as the small business rate relief, detailed below. 

Small business rate relief

Businesses who occupy “small” properties may be able to benefit from a business rates relief. For London businesses, small properties are defined as those which have a rateable value (RV) of under £25,000.

Introduced in 2010, the Small Business Rate Relief Scheme offers a relief on business rates, which range from 50 per cent for premises with an RV of under £6000, steadily declining to a 0 per cent relief on properties with a RV below £12,000.

For businesses with more than one premises, the main property must have a RV of £12,000, with any additional properties having a RV of under £2,600, and the aggregate RV of all of their properties must fall within a £25,000 RV in order to qualify for small business rate relief. 

Transitional relief

Factors such as inflation and rating revaluation can affect business rates payable on a commercial property. In order to reduce the impact of this, transitional adjustments were introduced, with the aim of reducing the amount by which payable rates could rise, or fall by in a single year. 

For example, a business occupying a large property in England will not see their business rates rise or fall by more than 12.5%, plus the rate of inflation, in a financial year. 

If a revaluation results in the reduction of your RV, you may be entitled to a rate refund, with interest, depending on whether your previous rate payments have been made on time and are up-to-date. 

Appealing a rateable value decision

You may disagree with the RV your commercial property is assigned, in which case you have the right to an appeal; you can either do this yourself, or through a chartered surveyor. To appeal, you must do so in writing to the local Valuation Office Agency. 

If your appeal is considered valid, a Valuation Officer will inform you of when your appeal will be discussed. Most appeals will be settled by agreement at this stage, although some may be taken to a Valuation Tribunal. If the outcome of the tribunal is disputed by either party, the next step is to take it to the Upper Tribunal (Lands Chamber).

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