Relief from business rates

Summarising the changes coming into effect in April.

In 2015 the government launched a wide-ranging review of national business rates which was designed to pave the way for changes to how businesses across England pay the tax. The outcome of this review was to implement changes for businesses, particularly smaller ones. The following are the changes and reliefs for smaller business which come into effect from April 2017.

Overview of business rates

Business rates are charged on most non-domestic properties, like:

• shops
• offices
• pubs
• warehouses
• factories.

Business rates are worked out based on the property’s ‘rateable value’. This is currently the open market rental value on 1 April 2008, based on an estimate by the Valuation Office Agency (VOA). This value is then multiplied by a figure (multiplier) which is set by central government and this calculation shows what the rates liability will be.

The rates bill can be reduced if your property is eligible for business rates relief.

Business rates calculations prior to April 2017

• Business rates are not payable on properties with a rateable value of £6,000 or less.
• Where the rateable value of the property is below £12,000 business rates relief can be applied and goes down gradually from 100% to 0% for properties with a rateable value between £6,001 and £12,000.
• Even if the business does qualify for small business rate relief, the business rates will be calculated using a small business multiplier instead of the standard one. This is the case even if the business uses more than one property. The multipliers (set by the government):

Small Business Rate Relief will be doubled (from 50% to 100%). This means that businesses with a property with a rateable value of £12,000 and below will receive 100% relief.

Businesses with a property with a rateable value between £12,000 – £15,000 will receive tapered relief. By raising the relief threshold to £15,000, the then Chancellor George Osborne said it would take 600,000 small businesses out of paying business rates entirely: ‘This is significant and is very, very welcome, given that SMEs account for some 50% of private sector value added in the economy and business rates are often a large outlay’.

The new rates for the small and higher multipliers is set at:

The threshold for the standard business rates multiplier will be increased to a rateable value of £51,000. Therefore, businesses with properties with a rateable value below £51,000 will pay lower rates.

The Valuation Office Agency (VOA) sets the rateable values of all business properties. The new rateable values, released on 30 September 2016, are based on the rental value of properties on 1 April 2015. These will be used to calculate business rate bills from 1 April 2017.

Full guidance from the government including details of how to check the rateable value and how to appeal against a rates liability can be found here. There are also other reliefs for entities such as charities and rural businesses which are featured in this guide.

The Chancellor has an opportunity at the Spring Budget to reshape the future of the business rates system in England in order to prevent the catastrophic consequences for UK businesses of the planned revaluation measures due to come in to effect this April.

Chas Roy-Chowdhury, head of tax at ACCA, says: ‘Linking the business rates regime to current property valuations—as outlined in the government’s Business tax road map — may seem at first glance to be a sensible proposition but actually requires careful consideration particularly given that ratable values have not been adjusted in almost a decade. The government should ensure that this is not introduced at the expense of the competitiveness of UK plc as a place to work and to locate a business.

‘The system also needs to take account of fairness when some high-street shops will be hit by hikes of over 400% on current rates, while online retailers will see rates cut in many instances.

‘For many of the productivity-boosting SMEs up and down the country, increases will eat into disposable income which could better be spent on investment, recruitment or research and development. This is particularly important given the low levels of confidence following the result of the referendum on the UK’s membership of the European Union and looking ahead to the longer term effect of the devaluation of sterling in increasing supplier costs.

‘The government should revisit these proposals and carefully consider if the revaluation is the best way to raise revenue from the UK’s thriving small and medium sized businesses in an era of high uncertainty for the future.’

Article from ACCA In Practice