Reducing your business tax with business rates relief

A pen, pair of glasses and pile of coins on a tax return form

In the 2014 Autumn Statement, announced on 4 December, the government outlined a number of changes to business rates relief that will benefit small businesses in the UK in the coming year.

If you use some or all of your property for commercial purposes, you are likely to have to pay business rates. If you lease your property out to a paying tenant, they are responsible for paying business rates; however, if there is no current lease, the responsibility is yours.

See our in-depth guide to business rates for England, Wales, Scotland and Northern Ireland.

Business rates can be very high, but there are a number of ways to claim business rates relief. Below is our guide to the forms of relief available to businesses throughout the UK.

Contents

  1. Business rates relief in England
  2. Business rates relief in Scotland
  3. Business rates relief in Wales
  4. Business rates relief in Northern Ireland

Business rates relief in England

Your council should automatically apply transitional rate relief and exempted buildings relief. You will need to apply directly for other forms of relief. If you believe that you aren’t getting the relief that you are entitled to, you should contact your local council.

Contact your council about business rates relief.

Business rate exemption

A full list of properties exempt from paying business rates in England and Wales can be found in the Local Government Finance Act 1988, Schedule 5.

Rural rate relief

You are entitled to a minimum rate relief of 50% if:

  • Your business is the only post office or village shop in a rural area with a population below 3,000 and has a rateable value of up to £8,500
  • Your business is the only petrol station or public house in a rural area with a population below 3,000 and has a rateable value of up to £12,500

Rural rate relief beyond this is at the discretion of your local council. They may top up the rate relief up to 100% and extend relief up to 100% to other rural retail businesses with rateable values up to £16,500. Contact your council to see if you are eligible for rural rates relief.

Charitable rate relief

If you use your property for charitable purposes, you may be eligible for up to 80% business rates relief. Your council may also provide you with discretionary relief of up to 100%. Contact your council to find out if you are eligible.

Enterprise zone relief

24 areas in England qualify as enterprise zones, where business growth is encouraged through special tax breaks and development incentives. If you start up in or relocate to an enterprise zone you could claim up to £275,000 over five years.

Find an enterprise zone.

Empty buildings relief

Empty buildings are exempt from business rates for three months. Certain properties also qualify for extended relief:

  • Industrial premises, which are exempt for a total of six months
  • Listed buildings, which are exempt until they are reoccupied
  • Buildings with a rateable value of less than £2,600, which are exempt until they are reoccupied
  • Properties owned by charities, which are exempt until they are reoccupied so long as they will next be used mostly for charitable purposes
  • Community amateur sports clubs, which are exempt until they are reoccupied so long as they will next be used mostly as a sports club

Note for landlords: Even though your tenant is normally responsible for paying business rates, the responsibility becomes yours when the property becomes unoccupied. Empty buildings relief is therefore a particularly important relief for you.

If your commercial property becomes vacant, contact your council to inform them.

Empty properties reoccupation relief

If you occupy a retail premises that has been empty for at least 12 months, you can qualify for a 50% empty properties reoccupation relief. Contact your council to find out more.

Small business rate relief

Small business rate relief applies in a number of instances:

  • You use only one property that has a rateable value of less than £6,000: Double the ordinary rate of relief of 50% will apply for your property until 31 March 2016, meaning that you will not pay any business rates at all.
  • You use only one property that has a rateable value of between £6,000 and £12,000: your relief will be calculated on a sliding scale, starting at 100% and working down to 0%.
  • You use multiple properties, each of which has a rateable value less than £2,600: the rateable values of your properties will be added together and the relief applied to your main property. If you purchase a second property, you will remain entitled to your current level of relief for 12 months.

You are still considered a small business if your property’s rateable value is below £18,000, or £25,500 in Greater London. If you are considered a small business but don’t qualify for relief, your rates will still be calculated using a lower business rates multiplier.

See a list of current business rates multipliers.

Business rates relief in Scotland

Small Business Bonus Scheme

The Small Business Bonus Scheme (SBBS) enables you to qualify for up to 100% relief if the combined rateable value of all of your business premises is £35,000 or less. The relief available is as follows:

  • 100% for multiple premises with a combined rateable value of up to £10,000
  • 50% for multiple premises with a combined rateable value between £10,000 and £12,000
  • 25% for multiple premises with a combined rateable value between £12,000 and £18,000
  • 25% for each property with a rateable value of less than £18,000 where the combined rateable value of your premises does not exceed £35,000

The maximum saving for the 2016–17 tax year is £4,840. Contact your local council about applying for SBBS.

Empty buildings relief

All business premises benefit from 50% business rates relief for three months after they become unoccupied, and 10% relief thereafter.

Empty industrial premises get full relief for six months after they become unoccupied, and 10% thereafter.

Listed buildings and properties with a rateable value of under £1,700 are completely exempt from paying business rates.

Fresh Start relief

You might be entitled to a 50% discount on your business rates under Fresh Start relief if:

  • You occupy a property after it has been empty for 12 months or more
  • The rateable value of the property is less than £65,000
  • The property was last used as a hotel, office, pub, restaurant or shop, or you intend to use it as such and it had no previous use

Contact your council to see if you are eligible for Fresh Start relief.

New Start relief

New Start relief is applicable to some properties built on or after 1 April 2013, and entitles the owner to up to 100% relief for 15 months while they are empty. Contact your council to see if you are eligible for New Start relief.

Rural rate relief

Some small businesses in designated rural communities with populations of up to 3,000 are eligible for 50% business rates relief. These are:

  • Food shops, general stores or post offices with a rateable value of up to £8,500
  • Hotels, petrol stations or public houses with a rateable value of up to £12,750
  • Any other business with a rateable value of up to £17,000 that provides a benefit to the community

Some councils can, at their discretion, top up the 50% relief by up to a further 50%, exempting qualifying properties from business rates entirely. Contact your council to see if your business is eligible, and what rate relief is available for you.

Charitable rate relief

Charities and amateur community sports clubs that are used for charitable purposes can qualify for a business rates discount of up to 80%. Some councils offer further discretionary relief of up to 100%, and also offer relief to non-profit recreation clubs that don’t ordinarily qualify.

Contact your council to see if you are eligible for charitable rate relief.

Disabled persons relief

Some local councils provide up to 100% rates relief for business that provide:

  • Residential accommodation for the care or aftercare of ill people
  • Training, welfare services or workshops for people with disabilities

Contact your council to see if you are eligible for disabled persons relief.

Enterprise areas relief

Scotland is home to 16 strategic sites where investment in four key areas is encouraged through tax breaks and development incentives.  Up until March 2017, certain businesses starting in or moving to one of these areas can qualify for up to 100% rates relief.

Renewable energy generation relief

If your property or properties are used for the provision of energy from certain renewable energy sources, you may be entitled to up to a 100% reduction on your business rates bill. The reduction depends on the combined rateable value of your premises.

Find out more about renewable energy generation relief.

Business rates relief in Wales

Business rate exemption

See above.

Charitable rate relief

Properties used for charitable purposes that are occupied by a community amateur sports club or registered charity qualify for 80% business rates relief. Some councils may offer increased discounts of up to 100%, which apply to non-profit bodies that use their premises for:

  • Charity
  • Philanthropy
  • Religious purposes
  • Educational purposes
  • Social welfare
  • Science
  • Literature
  • Fine arts
  • Recreation for a non-profit club or society

Contact your local council about charitable rate relief.

Empty property relief

A 100% exemption applies to all empty premises for the first three months of non-occupation, after which the full business rate bill becomes payable once again.

Certain premises have longer exemption periods. These include:

  • Industrial buildings, which are exempt from a total of six months
  • Listed buildings, which are exempt indefinitely
  • Buildings with a rateable value of less than £2,600, which are exempt indefinitely
  • Buildings owned by charities, which are exempt indefinitely if they are likely to next be used for similar purposes
  • Community amateur sports clubs, which are exempt indefinitely if they are likely to next be used for similar purposes
  • Buildings owned by companies that are being voluntarily or involuntarily wound up under the Insolvency Act 1986
  • Buildings owned by companies that are in administration
  • Buildings owned by individuals who are entitled to possession in their capacity as a representative of someone who is deceased

Notify your council of a change in occupancy status.

Enterprise Zone Business Rates Scheme

Small and medium-sized businesses who are either starting up or expanding in one of eight Enterprise Zones in Wales can benefit from support in paying their business rate bills.

Find out more about Welsh Enterprise Zones.

Open for Business scheme

You can qualify for relief of up to 50% if you occupy a commercial building that:

  • Had previously been unoccupied for at least 12 months
  • Has a rateable value of no more than £45,000
  • Was previously used mostly or only for retail purposes, or is currently in use for such purposes and has never before been occupied

The scheme is open to applicants who occupied the premises before 31 March 2015, and entitles them to 12 months of relief. The deadline for applications is six months after the first day of reoccupation. Find out more about the Open for Business scheme.

New Developments scheme

Owners of business premises that were built between 1 October 2013 and 30 September 2016 can apply for a full, 18-month exemption from business rates. See the Welsh Government’s guidance on the New Developments scheme.

Hardship relief

Some councils can grant hardship relief of up to 100% to struggling businesses if they feel that it is in the best interest of local council tax payers. Find out more about hardship relief in the Welsh Government’s guide to rates relief for charities and other non-profit making organisations.

Small business rates relief

Properties with a rateable value of less than £12,000 can claim small business rates relief at:

  • 100% for properties with a rateable value up to and including £6,000
  • Between 0% and 100% for properties with a rateable value between £6,000 and £12,000, with the relief available decreasing as the rateable value increases

This scheme has been extended until 31 March 2017. Find out more about rates relief for small businesses in Wales.

Business rates relief in Northern Ireland

Charitable exemption

If your property is occupied by a charity or other non-profit organisation and run for charitable purposes and/or public benefit, you generally do not have to pay business rates.

Charitable exemption is complex, however, as many such properties have mixed uses and the exemption needs to be apportioned appropriately. For instance, if you run a charity shop from which you sell a mixture of donated and wholesale goods, the exemption would apply only in regards to the former use.

Find out more about charitable exemption from business rates in Northern Ireland.

Empty premises relief

If you occupy a former retail property that has been empty for 12 months or more, you may be entitled to 50% off your business rates bill for up to one year.

Find out more about empty premises relief.

Small Business Rate Relief (SBRR) scheme

Business premises with a net annual value (NAV) of less than £15,000 can qualify for Small Business Rate Relief (SBRR) until 31 March 2017. There are three levels of relief, which are as follows:

  • 50%, for businesses with a NAV not exceeding £2,000
  • 25%, for businesses with a NAV between £2,000 and £5,000
  • 20%, for businesses with a NAV between £5,000 and £15,000

SBBR should be applied automatically to your business rates bill by the Land & Property Services (LPS). Ratepayers with more than three properties of any size are exempt from this relief, as are ratepayers receiving any of the following benefits:

  • Freight and transport relief
  • Industrial derating
  • Sport and recreational relief

Certain property types are also exempt. Find out more on the NI Business Info website.

Small Business Rate Relief (SBRR) for small post offices

Some small post offices qualify for a special form of enhanced SBRR, which should be applied automatically by LPS. The thresholds for this relief are as follows:

  • 100%, for post offices with a NAV not exceeding £9,000
  • 50%, for post offices with a NAV between £9,000 and £12,000
  • 20%, for post offices with a NAV between £12,000 and £15,000

Find out more about rate relief for Small Post Offices.

Sports and recreation rate relief

80% rate relief may apply for premises that:

  • Provides amateur-level physical recreation facilities, and
  • Contributes significantly to healthcare

Only the part of the premises that is used for recreation qualifies for the relief.

Find out more about sports and recreation rate relief.

Residential homes rate relief

A 100% relief, residential homes rate relief is awarded to only some of the businesses that apply and runs for one year, after which it must be renewed. To qualify, all or part of your premises must be used mainly or solely for:

  • Accommodation and care or aftercare of ill or disabled people
  • Training ill or disabled people
  • Personal social services for disabled people
  • Employment or gainful work for seriously disabled people as set out in the Disabled Persons (Employment) Act (Northern Ireland) 1945 (section 15)

Find out more about residential homes rate relief.

Industrial derating

Manufacturing businesses in qualifying industrial premises can apply to pay a reduced business rate. This reduced level is currently 30%, though a decision to phase out industrial derating remains under review.

Ordinarily, certain industrial equipment such as power generation machinery contributes towards a business’s NAV, and therefore its total rate liability.

Find out more about industrial derating.

Non-domestic vacant rating

Most vacant non-domestic property (i.e. that which is unfurnished, unoccupied and not being used for storage) can qualify for a three-month business rates exemption, after which a 50% rate reduction will apply until the property is re-occupied. This is an important relief for commercial landlords, who are usually liable for business rates when their property is empty.

Find out more about non-domestic vacant rating.

Hardship relief

If you have suffered a temporary crisis as a result of exceptional circumstances outside of your control, and that has caused a serious loss of trade or otherwise impacted your ability to do business, you may be able to claim hardship relief. The maximum relief that can be offered is 100% for one year.

As LPS does not offer precise definitions for a ‘crisis’ or for ‘exceptional circumstances’, each application for hardship relief must be considered on a case-by-case basis. You can download the hardship relief application form and guidance notes from nibusinessinfo.co.uk.

ATMs in rural areas

Automatic telling machines (ATMs) in designated rural areas are exempt from business rates. A list of designated rural areas is provided in the Rates (Automatic Telling Machines) (Designation of Rural Areas) Order (Northern Ireland) 2006.

As this information should already be held by the LPS, your exemption should be applied automatically. If you feel you are entitled to relief you are not receiving, you should contact the LPS.

This information should not be interpreted as financial advice. Commercial mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.

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