Reducing your business tax with business rates relief

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

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.

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.

For definitive and current tax advice, seek the help of a tax professional.

2017 Spring Budget addresses business rates revaluation

In the 2017 Spring Statement, announced on 8 March, the chancellor announced that whilst he could not scrap business rates (responsible for an income of £25 billion per year), the government would be investing £435 million to support businesses affected by the business rates revaluation.

What is the business rates revaluation (England and Wales)?

The Valuation Office Agency (VOA) is a government body responsible for establishing the value of properties in England and Wales in order to calculate council tax and non-domestic rates.

The VOA will assess and adjust the rateable value of business properties based on changes in the property market, this happens typically every five years. The last revaluation was implemented on 1st April 2017 and was based on 2015 rateable values.

For more information about business rates revaluation in England and Wales, visit the “Business rates” section of the government website.

Who is responsible for business rates revaluation in Scotland?

In Scotland, the Scottish Assessors Association undertakes the business rates revaluation process, also on a 5 yearly basis and they too undertook their most recent revaluation in April 2017.

For more information about the 2017 business rates revaluation in Scotland, visit “Business rates and the 2017 revaluation – Scotland” pages of the Business Gateway website.

Who is responsible for business rates revaluation in Northern Ireland?

In Northern Ireland, Land and Property Services (LPS) is responsible for calculating and collecting business rates. The Northern Ireland Executive sets the regional rate annually and each district council sets the district rate.

Unlike England and Wales, Northern Ireland has kept to the 5-yearly revaluation pattern, so with their last review having happened in 2015 the next is not due until 2020.

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.

Transitional relief (England)

The 2017 transitional rates relief scheme is the same as it was for the last revaluation in 2010. If eligible to receive the relief, an annual cap will be placed on any increase or decrease to your bill, until the full bill is reached.

The transitional relief scheme will be in place for a maximum of five years, but the timeframe over which an individual business will receive the transitional relief will depend on the amount of change to its bill.

As mentioned above, your local council will automatically apply transitional relief if you are eligible, more information can be found on the government’s website.

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.

HMRC have stated that “If the 2017 revaluation means you no longer get rural rate relief, your bill won’t increase by more than £50 a month from 1 April 2017 to 31 March 2018.”

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

A number of 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 £2,900, 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 and the lease with the tenant has ended. 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

As of 1 April 2017, the government introduced changes to Small Business Rate Relief, which reduced the rate liabilities and increased the thresholds for small businesses. The briefing paper is here. This relief is only available to businesses with one property, except in specific circumstances, scroll further down this page for details.

Small business rate relief applies in a number of instances as outlined by the government:

  • Properties with a rateable value of £12,000 or less will have 100% relief (will not pay any business rates).
  • Properties with a rateable value of £12,001 to £15,000 will be eligible for relief on a tapering scale from 100% to 0%.
  • Properties with a rateable value between £15,000 and £51,000 will be subject to the small business multiplier, which is 46.6p.

The following illustrative example is provided on the government’s website and copied below for your ease:

Barbara has a business in England. The rateable value of her business is £10,000, so she uses the 2017 to 2018 small business multiplier (46.6p) to estimate her business rates as follows:

£10,000 (rateable value) x £0.466p (multiplier) = £4,666 (basic business rates)

As her rateable value is less than £15,000, she may be able reduce her bill to nothing by applying for small business rate relief.

Source: https://www.gov.uk/calculate-your-business-rates

Small businesses with multiple properties

If you have business with more than one property, you are only eligible for small business rate relief if the additional property/properties have a rateable value of £2,900, and the total rateable value of all properties does not exceed £19,999 (£27,999 in London).

The relief is only available on the main property, not on any smaller properties occupied by the business.

Small businesses ineligible for rate relief

Small businesses that do not qualify for business rate relief with properties of a rateable value of £51,001 and above will be subject to the standard multiplier of 47.9p for the period 1st April 2017 – 31st March 2018.

Properties in the City of London are subject to higher multipliers, for information on this visit the Business section on the City of London website.

Check the rateable value of your property on the Government’s website.

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:

Properties with a rateable value of up to £15,000 will have 100% relief (will not pay any business rates).

Properties with a rateable value of £15,001 to £18,000 will have 25% relief.

Scottish small businesses with multiple properties

If the combined rateable value of all of your properties is £18,001 - £35,000, then each individual property whose rateable value is less than £18,000 will be eligible for 25% relief. (E.g. if you have two properties, each with a rateable value of £15,000 both properties will be eligible for 25% relief. If you have two properties, one with a rateable value of £19,000, the other a rateable value of £16,000 the first property will not get relief, the second will get 25% relief).

The maximum saving for the 2017–18 tax year is £6,990. 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 started occupying a property on or after 1 April 2014 after it had 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%-100% 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 a number strategic sites where investment in four key areas is encouraged through tax breaks and development incentives.  Up until March 2020, 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.

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, available via a link on this page of their website.

Small business rates relief

This relief has been extended to 31st March 2018, after which a new permanent scheme will be introduced. 

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 £6,001 and £12,000, with the relief available decreasing as the rateable value increases

(There are further notes for retail premises, post offices and registered childcare premises the full details are available via the link below).

Find out more about rates relief for small businesses in Wales.

Transitional relief

As mentioned earlier in this article, the 2017 revaluation of business rates by the Valuation Office Agency has significant repercussions for businesses across England and Wales. Transitional relief mitigates the impact of a change to your bill.

Any ratepayer whose Small Business Rates Relief will change in status (full to partial, full to none, partial to none or whose rateable value is increasing) are eligible to receive transitional relief. The relief will spread the increase in liability by 25% per year over a 3-year period until in the fourth year 100% of rates will be liable.

Business rates relief in Northern Ireland

Business rate exemption in Northern Ireland

Details describing properties exempt from paying business rates in Northern Ireland are on the NIBusinessInfo website, which works in association with NI Direct Government Services and Invest 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.

Back in Business rate support scheme

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 the Back in Business rate support scheme

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 2018. 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.

The SBBR for small post offices finished on the 31 March 2017 and is expected to be reviewed. 

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.

Northern Ireland Business Info website states that: “From 26 October 2016, the maximum relief available on qualifying Sport & Recreation areas within the club premises is enhanced from 80 per cent to 100 per cent for community amateur sports clubs (CASCs) which do not have a full licence to sell alcohol. Eligible clubs can now apply for the enhanced 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.

Do be aware though, that the property must have been occupied for a minimum of six weeks prior to a free period being applied.

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.

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. We can only make recommendations for products we broker.

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