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PROPERTYADVICE

Business Rates: Key Terms and Reliefs

Business Rates (Non-Domestic Rates) is a property tax based on the size and rental value of commercial property.  The revenue is used to contribute towards the cost of local services.

The following is a list of key terms and rates reliefs available (A-Z):

KEY TERMS

Appeals

Business rates appeals can be submitted to the Local Authority Finance Department on the basis that the rates bill is incorrect.  This may include bills that are incorrectly calculated, notified to the wrong ratepayer or where relief should be applied.

An appeal against rateable value (RV) is permitted where the Scottish Assessors Association or Valuation Office makes a change to the value.  In Scotland, an appeal is also permitted where there is a change of owner, tenant or occupier. An appeal can also be instigated where it can be proved that a Material Change has occurred which has an adverse effect on value.  It should be noted there are strict timescales with regards to lodging appeals.

 

Rateable Value (RV)

The Local Authority will inform the owner and tenant of a property what the rateable value (RV) is at the beginning of a new Revaluation or if there has been a Material Change of Circumstances.  The RV is usually based on the area and rental rate of the property, but exceptions exist (e.g. licenced premises or hotels based on turnover); specialist buildings may be valued on a ‘contractor’s basis’ (cost method).

 

Rates Bill (Rate Liability)

The rates bill will be issued by the local Council and is usually split into 10 monthly payments but requests can be made to split this over 12 months.  Non-payment of rates may result in full payment being requested as well as fines.  The calculation for a bill is: RV x Uniform Business Rate (UBR)  (you can use our calculators). Various reliefs may then be applied to calculate the final bill payable.

 

Rates Mitigation

Mitigating the cost of business rates for unoccupied properties has become vital since the recent reduction in relief when a property becomes vacant. There are opportunities to mitigate against this liability and savings to be made from reviewing alternative uses or charitable occupation of properties where such potential occupiers have a property requirement.

 

Rating Revaluation

This generally happens every 5 years but the Government postponed the 2015 Revaluation until 1st April 2017.  The reason for regular Revaluations is to reflect market changes in rents throughout the country and in different sectors. Property owners and tenants have a right to appeal the rateable value if they believe it is incorrect.

 

Uniform Business Rates

UBR is a multiplier used to calculate business rates liability. The UBR normally increases annually in line with the September RPI (Retail Price Index) increase.

Scotland

The UBR for 2017/18 is:

  • 46.6p (for properties with a RV less than or equal to £51,000) and:
  • 49.2p (for properties with a RV greater than £51,000).

England

The UBR for 2017/18 is:

  • 46.6p (for properties with a RV of less than or equal to £51,000) and:
  • 47.9p (for properties with a RV greater than £51,000).

City of London

The UBR for 2017/18 is:

  • 47.1p (for properties with a RV of less than or equal to £51,000) and:
  • 48.4p (for properties with a RV greater than £51,000).

The Greater London Authority levy an additional supplement of 2p for RVs > £70,000 (for Crossrail)

Wales

The UBR for 2017/18 is:

  • 49.9p (all properties) 

Valuation Notice

Landlords, tenants and occupiers will receive a Valuation Notice if there is ever a change in the property, if a tenant carries out any works or if the landlord does which affect value (the Notice will detail the new value).  At the time of the Revaluation, ratepayers, landlords and owners receive a Valuation Notice with a right to appeal against the new Revaluation figure. The process/timescale for making an appeal will be outlined in the Valuation Notice.

 

Valuation Roll

The Valuation Roll is produced and maintained by the Valuation Boards of the various Local Authorities.  It sets out the RVs of all land and buildings and in some cases, the areas and rates applied.  The Roll is a public document and is available to search online.  In England, the Valuation List is available via the Valuation Office Agency and in Scotland from the Scottish Assessor’s Association.

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RATES RELIEF

The are numerous types of rates relief.  Some are available in both Scotland and England but there are variances and they are applied differently.  Here is a breakdown:

 

MAIN FORMS OF RELIEF

Small Business Bonus Scheme (Scotland)

The purpose of this scheme is to alleviate the burden of Non Domestic Rates for small businesses.  The relief is based on the rateable value (RV) of each property which is then applied to the base liability (RV x UBR).

The breakdown for the Small Bonus Scheme in 2017/18 is:

  • RV £1 to £15,000 - 100% relief
  • RV £15,001 to £18,000 – 25% relief
  • RV £18,001 to £35,000 – 25% relief on individual property each with RV up to £18,000*

*A ratepayer with multiple properties with a cumulative RV between £15,001 and £35,000 can be eligible for 25% relief for individual properties each with RV up to £18,000.

 

Small Business Rates Relief (SBRR) (England)

The purpose of this scheme is to alleviate the burden of Non Domestic Rates for small businesses.  The relief is based on the rateable value (RV) of each property which is then applied to the base liability (RV x UBR).

The breakdown for SBBR in 2017/18 is:

  • RV £1 to £12,000 - 100% relief
  • RV £12,001 to £15,000 – The rate of relief will graduate from 100% to 0% depending on RV
  • RV £15,001 to £51,000) - no relief is awarded but properties are subject to the small business UBR (without the supplement).

 

Vacant Rates Relief (Empty Property) Scotland

New legislation came into effect in Scotland on 1 April 2016, which resulted in dramatic changes to empty property relief.

Prior to 1 April 2016, empty industrial property obtained 100% relief when vacant.  Now, this 100% relief only applies for the first six months of a property being empty, after which time the level of relief is reduced to just 10%.

For other commercial property (offices and retail) which previously obtained 100% relief for the first three months, the relief has been cut to 50% for the first three months and thereafter to 10%.

 

Vacant Rates Relief (Empty Property) England

All vacant commercial buildings receive 100% relief for the first three months (or six months for industrial property), before reverting to full rates payable.

 

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OTHER FORMS OF RATES RELIEF

Charitable Relief

Registered charities are entitled to 80% relief as long as the property is being used wholly or mainly for charitable use.  Councils may grant a further 20% discretionary relief.

 

Community Amateur Sports Clubs (CASC)

In England, sports clubs which are registered as Community Amateur Sports Clubs with HM Revenue and Customs qualify for 80% relief.  In Scotland, 100% relief may be awarded to clubs practising a sport recognised by SportScotland.  If a club has a licence to sell alcohol, relief is dependent upon bar takings and varies throughout the country.

 

Disabled Relief

In England, buildings used for training or welfare of disabled people are exempt from rates.

For Scotland, you may get disabled relief if you provide:

· residential accommodation to care for people who are ill;

· facilities for training people who are ill; or

· welfare services or workshops for disabled people

(At least half of the floor space must be used for these purposes).

 

Discretionary Relief

Councils have discretionary powers to grant up to 100% rate relief to non-profit making organisations.  An organisation must either be charitable, religious, or concerned with education, social welfare, science, literature or the fine arts, or the property must be used by a non-profit-making organisation and used wholly or mainly for the purpose of recreation (sport).

 

Fresh Start Relief (Scotland)

This is offered at 50% for a period of 12 months on the basis that the property previously was in receipt of Empty Property Relief for a continuous period of at least 12 months, the property has an RV of under £65,000, and when last used the property was either a shop or office.

 

New Start Relief (Scotland)

This is available for new build properties completed in the three financial years from 1st April 2013. The relief is offered for a total period of 18 months for up to 100%.

Such relief is awarded under State Aid De Minimis and limited to no more than €200,000 (around £171,000 at time of writing) over a rolling three-year period for all properties occupied by the business.

 

Renewable Energy (Scotland)

Renewable energy producers who are solely concerned with the production of heat or power (or both) from specific sources e.g. biomass, biofuels, solar power etc are eligible for this relief. The generation activity must take place at the eligible property.

Qualifying renewable properties with community investment in receipt of a monetary return receive:

· RV up to £145,000 - 100% relief

· RV £145,001 to £430,000 - 50% relief

· RV £430,001 to £860,000 - 25% relief

· RV £860,001 to £4 million - 10% relief

· RV more than £4 million - 2.5% relief

(The RVs are combined for more than one business property)

Qualifying renewable properties operated by an individual with no community investment are entitled to the following levels of relief for property built between 1 April 2016 to 31 March 2017 and entered in the valuation roll from 1 April 2017:

· RV £500,000 or less – 10% relief

· More than £500,000 - 1.5% relief

 

Rural Rates Relief (Scotland)

The latest proposal for 2017/18 from the Scottish Government states that if a post office or shop is in an area designated as a rural settlement (less than 3,000 people) and the RV is no more than £8,500 it may be entitled to 100% relief.  Pubs, hotels and petrol stations in Scotland with RV of no more than £12,750 may also be entitled to 100% relief. Other properties may be considered at the discretion of the Council if used for the benefit of the local community.

 

Rural Rates Relief (England)

If a post office or shop is in an area designated as a rural settlement (less than 3,000 people) and the RV is no more than £8,500 it may be entitled to 100% relief.  Other properties may be considered at the discretion of the Council if used for the benefit of the local community.

 

Transitional Relief (TR)

TR is where large variations in the rate liability of a property are phased in over a number of years rather than the bill payer facing a large immediate increase/decrease in their rates.

 

TR (Scotland)

TR relief was abolished in Scotland before the 2010 Revaluation.  However, the Scottish Government has published details of 2017/18 rates bill caps in the Non-Domestic Rates (Transitional Relief) (Scotland) Regulations 2017 for certain categories of property. More information on the business rates caps can be found here

 

TR (England)

The Government has released a summary of its transitional arrangements consultation for the 2017 business rates’ revaluation (view paper here). The tables below outline the TR scheme.

If your rates bill has increased:

Note: This is the restriction in actual rates payable from year to year.

If your rates bill has decreased:

Note: This is the restriction in actual rates payable from year to year.

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SPECIAL CONDITIONS 

Business Improvement District (BID)

A BID is a business-led and business-funded body formed to improve a defined commercial area. A levy is payable by companies located in a BID area which will be run as a not for profit organisation.  This will manage and deliver projects and services to make the area a better place to work and in which do business.

 

Enterprise Zone/Area

These are locations designed to encourage business investment while providing support for start-ups to become established.  Incentives such as reduced rates are available in these locations, which tend to be sector focussed.

 

Exempt Properties

Agricultural land & buildings; fish farms; public parks, consulates and embassies are exempt from entry in the Valuation Roll.  This means they do not pay non-domestic rates.

When certain properties become vacant, they are exempt from paying rates.  These include Listed buildings and land or properties whose owners have gone into liquidation or administration.