If you’re a business owner with premises separate from your residential address, you’ll most likely have to factor business rates into your monthly outgoings. Business rates are the business version of council tax and, across the UK, around 1.8 million commercial properties are eligible for the property tax. The amount a business pays is calculated according to the property’s annual market rent, a figure determined by the Valuation Office Agency, which uses other local rents to arrive at an average. Every five years these calculations are reset and, from 1st April 2017, the most recent business rates revaluation will come into effect. Various national organisations that advocate for SMEs have come together to protest against a particular clause in the newly updated tax legislation, which will make appealing against the rate more difficult to do. The thirteen organisations, which include the Federation of Small Business, the British Chambers of Commerce and the Association of Convenience Stores, have written a joint letter describing the updates as ‘outrageous’ and demanding that the revised appeals clause should not be implemented.
What does the new clause mean?
When the business rates on commercial properties were last revised in 2010, almost 50% of businesses appealed against the sums they were asked to pay. To reduce the number of appeals made, and therefore bolster the amount of money it can demand, the government has made provision to allow itself to dismiss appeals against incorrect valuations if they fall within a certain margin of error, or the limits of ‘reasonable professional judgement’. What exactly the margin of error will be has not been published but experts have estimated it may be around 15%. This allowance of 15% ‘reasonable professional judgement’ will let the government rapidly dismiss many business rate appeals, meaning that businesses will have no recompense should their rates suddenly increase in the new round of valuations.
The revaluations (which were published on 17th February 2017) are based on rentable values as of 1st April 2015, so why have they taken so long to come into effect? In fact, the government was attempting to avoid ‘sharp changes’ at that point in time, perhaps mindful of the general election just around the corner. However, in waiting to implement the new valuations the government has thrown some SMEs a major financial curveball. That’s because property prices have shifted dramatically since the previous revaluation, with some rising exponentially (particularly in London and the South East) and some falling dramatically. This means, when it comes to this latest change to business rates there will be winners and losers. There is some protection in the form of a cap to prevent rates rising or falling beyond certain thresholds over the next few years. However, despite this safety measure, some businesses will be looking ahead to the next few years with a degree of financial trepidation.
Find out where you stand
If you haven’t already looked into the business rate relief changes, now is the time to do it. Use the government’s online support information to find out where you stand and whether the changes will impact your bottom line. Remember that the way this property tax is handled varies depending on whether you trade in England, Scotland, Wales or Northern Ireland. Also, look into the different types of relief that may be available to you. As well as small business rate relief, there is relief for some rural traders and charities, plus those operating in specific enterprise zones. As business rates are paid direct to your local council you can also contact the team there for support.
Let us know how your enterprise is affected
If you run an small or medium-sized business, we want to know what you think of the changes to business rates. Please take a look at our short survey here.