Business rates bills: do you know what’s on yours?

Businesses in the UK will soon be receive their Business Rates bills and surprise, surprise, there’s another increase. 

However, it's absolutely vital that you understand how your bill works. As many know by now, in last year’s autumn statement the government chose to increase business rates by 6.7% from the 1st of April 2024. This is in line with the September 2023 inflation rate. However, only commercial properties whose rateable value (RV) is over £51,000 will see this reflected in their bills.

As this year’s rates bills come in, many will be receiving this news for the first time. Whilst this increase shouldn’t break businesses, it may well become yet another financial burden. Especially, as these are the properties with the biggest liabilities. Quite simply, it could prove to be the last straw for many.

So much for government tax breaks!

Every local authority presents the information business rates payers need, but they all do it differently. Whether it is the calculations; format; or the information itself. Leaving many to decipher just what it is that's in their bill.

So, what is it that you should be looking for in your rates bill?

Ensure all details are correct (address, name, property etc.)

Check the schedule of payments due

The amount paid

The continuation of any reliefs

If there are any credits or debts on the account you were previously unaware of

All too often, small changes to rates bills can have lasting, negative impacts. So it;'s vital you understand your bill or are able to seek professional help in doing so.

While local authorities are responsible for distributing and collecting business rates, it is the Valuation Office Agency (VOA) who calculates and attributes them. 

Unlike smaller businesses, who will once again benefit from the freeze on the small business multiplier and the Retail Hospitality and Leisure (RHL) relief, medium and larger business will face their second increase in just twelve months. An increase that RVA Surveyors has said will cost business rates payers an additional £1.5 billion.

According to the government, in the first six months of the 2023 rating list alone, almost 40% of the submitted checks (the first stage of the government’s appeal process) were still outstanding by November. In this same timeframe, only 7% were resolved.

“Cases can be thrown out on the smallest technicality.” Anthony Hughes, managing director of RVA Surveyors, said. “How are people supposed to find the time to learn and navigate the complicated process set by the government to reduce business rates, while also running a business?”

“Physical, on-site inspections are the only way to ensure a property’s business rates are accurate.” Hughes added. “Given the size [of the VOA], it's not a stretch that they are able to inspect every commercial property within a rating list period.”

To learn more visit https://www.rvasurveyors.com.

(Image courtesy of Gerd Altmann from Pixabay)

What’s happening with empty property relief?

The autumn statement should have provided a good platform for the government to have their say on empty property.

The property industry was in uproar as the government debated empty property rates for businesses. The Non-Domestic Rating Bill proposed changes to ensure more transparency, yet many are still sceptical as to its ability to undertake this. 

More recently however, central government and local authorities seem to be focusing their energies on the minority who abuse the empty property rates system. This is instead of ensuring support for the majority is stabilised and simplified.

The autumn statement should have provided a good platform for the government to have their say on empty property. Experts across the board however were reportedly 'disappointed' when they were less than forthcoming. Both on camera, and in writing.

According to the Department for Levelling Up, Housing & Communities, previous consultations suggest businesses are maintaining a minimal occupation period to obtain repeated reliefs. 

As such, the government were reviewing how empty property reliefs should work, if not scrapped altogether. This could have a negative impact on charitable organisations, who often hold vacant properties for use such as aid distribution centres or for retail purposes. 

Historically, they also have zero rates liability (as long as the properties in question are used for charitable purposes). One drawback of such reviews, is many believe it will mean charitable organisations will lose out on empty property relief altogether.

The current economic climate is discouraging investment on a local and national level

Business owners and leaders are unable to invest in their own operations; with few looking to take on additional properties in this high inflation - low growth economy. Many may be eligible for reliefs – such as Retail Hospitality and Leisure (RHL), which has been extended to offer a continued 75% discount to rates payable. 

As business rates are usually in the top four outgoing costs for any business, this generous relief should be allowing commercial property owners and tenants the wiggle room they need to invest. In reality however, it is simply procrastination at work.

Anthony Hughes, Managing Director at RVA Surveyors, was happy to weigh in. “The tricky thing here is balancing between ensuring those in actual need of reliefs have them swiftly applied, compared to the minority who are gaming the system,” Hughes said. 

“Because that doesn’t help anyone. Punishing the many for the actions of a few, is a ridiculous stance to take when business rates have climbed so high. And are set to rise even further for many, when April [2024] comes around.”

What about empty property relief?

Empty properties are eligible for business rates relief for a period of three months. This extends to six months for industrial units (as these are generally recognised as being harder to find tenants for). After this period, a property can't benefit from empty property relief unless the property in question is then occupied for a period of at least six weeks, before it once more becomes vacant.

A Treasury spokesperson said in September: “There are no plans to abolish Empty Property Relief for anyone. While this relief provides important support to landlords with vacant properties, local authorities and previous respondents to consultations have identified it as a significant channel for avoidance activity. The government is therefore seeking views on proposals that aim to balance support for those who require it with the need to tackle abuse.”

One of the latest consultations on empty property business rates focuses on proposals to reduce evasion and avoidance

In Wales, they have already implemented a plan to cut down on those attempting to circumvent paying business rates. The ‘reset period’ (six weeks) required before a property can become vacant and therefore be eligible for the relief once again, has been extended to a minimum of six months. This is one of the proposals considered in the Business Rates Avoidance and Evasion Consultation.

The Local Government Association (LGA) estimated that for 2017/2018, unpaid business rates cost the Treasury £250 million. This was around 1% of the projected total business rates income for that year. The most common way of doing so, was found to be repeated short term occupation of a property. Resulting alone, in an average loss of £396,000 for that tax year. This is but a drop in the ocean when business rates are expected to pull in £24.9 billion for 2023/2024. Government resources would be better prioritised streamlining the business rates system for modern needs.

To learn more visit https://www.rvasurveyors.com

What can businesses expect to hear about inflation in the autumn budget?

In the last few weeks and months, a steady wave of business leaders has written to the government calling on them to scrap the inflation-linked increase expected. 

With the 2023 autumn budget right around the corner (22nd November), this only becomes more relevant for commercial property owners and tenants.

Anthony Hughes, Managing Director at RVA Surveyors, expressed his concerns for the upcoming autumn budget.

“This is something everyone in the rating industry has been following for a while,” Hughes said, “It could quite easily spell disaster for many. Spending is decreasing for businesses and consumers alike. The knock-on effect being that even with the typical spike in holiday trading, this won’t necessarily equate to keeping businesses afloat. Clarity is needed here, and the government need a strong plan going forward that gives businesses the support they need – not a bill worth more than £1.5 billion looming over their heads.”

Kate Nicholls, CEO of UKHospitality said: “The freezing of rates and extended relief could be the ‘lifeline’ needed for the hospitality sector.”

Business rates are often the third or fourth biggest expense for any commercial property owner or tenant. At the beginning of the 2023 revaluation, the average national increase for rateable values (RV) in England and Wales was 7.1%. Now, business rates payers face another increase. One almost as large as the national average increase that came into effect earlier this year; even before the upcoming proposed end date for the Retail Hospitality and Leisure (RHL) relief.

Unchanged inflation means higher costs for businesses

While inflation estimations saw it fall to around 6% for September, it in fact stagnated at 6.7% before dropping to 4.6% for October. This means that the significant rise in business rates predicted for 2024, will be even higher. This inflation, measured against the Consumer Price Index (CPI), indicates to government by how much they should raise business rates by, in the next financial year.

However, this is an unprecedented inflation. Beset by two factors in particular: multipliers are at the currently highest level since they were introduced (1990), and that RHL relief is currently set to end at the same time. The multiplier determines the amount of pence in the pound you pay against your rateable value. It is this figure that projected increases (calculated by CPI) will be directly impacted by.

RHL was expanded to cover 75% of the rates payable per property (up to £110,000) for 2023/2024. This was part of the business support package introduced in the 2022 autumn budget. While not directly influenced by the inflation-linked rise, it is currently set to end at the same time business rates are supposed to increase. With no backup or next stage yet to be announced. The government have been strangely tight-lipped considering. With nothing forthcoming, it leaves business rates payers wondering just what exactly to expect.

UKHospitality has projected that the jump in tax bills paid by pubs, restaurants, and hotels alone will be around £234m. If the expected end of RHL and other support goes ahead as currently predicted, they estimate this will add a further £630m to businesses outgoing costs.