Business rates in the UK are a tax on the right to occupy commercial property and typically equate to approximately 50% of annual rent. They represent one of the largest overheads for businesses and substantially impact on profitability.
Business rates are calculated in a two-step process. Firstly, the Valuation Office Agency (VOA) are tasked with estimating the annual rent the property is likely to let for as at a statutorily fixed valuation date. This is called a Rateable Value (RV) and is placed in the rating list alongside the address of the property to form the assessment. These can be found on the VOA website here.
The second step is this RV is then used to create the liability by multiplying it by the Uniform Business Rate (UBR) factor which is set every year. This is typically around 50p in the £ and therefore the charge is approximately 50% of the annual rent. The UBR is adjusted every year for inflation by applying the Retail Price Index (RPI).
The VOA are responsible for revaluing all assessments usually every five years. The valuations are based on the rental market two years prior to the rating list going live and this is called the Antecedent Valuation Date (AVD). The latest rating list came into force on the 1st April 2017 with rateable values based on the rental market of April 2015. Unusually, the last time the revaluation had been carried out was seven years prior in April 2008 and it is the change in the property market over these seven years which is now reflected in the new assessments.
Announced in March 2016's budget, small business rate relief will double from £6,000 to £12,000 from April 2017. Small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates (subject to qualifying conditions). There will be tiered relief on properties worth up to £15,000. Any property with a rateable value of £51,000 or below will be calculated using the Small Business Multiplier.
From 1st April 2017, the threshold at which empty properties become liable to pay rates increased to £2,900.
As one of the leading specialist teams in this sector, we offer a full rates management service which will ensure that this costly overhead is mitigated at every stage. Article I.
Knight Frank's business rates experts are members of the Royal Institute of Chartered Surveyors (RICS) and the Institute of Revenues, Rating and Valuation (IRRV)
Our latest guide to business rates provides you with all the facts and figures to help you calculate your rate charges