What are Business Rates? Everything you need to know

Business rates are a tax on business occupiers fixed by the Government and collected by the Local Authority. In this guide, you’ll learn the answers to the following questions:

• What are business rates?
• Are they important to me?
• Can they be challenged?

What are Business Rates?

Business rates are a tax on business occupiers fixed by HM Revenue & Customs (HMRC) on behalf of the Government. The Local Authority collects them to pay for their expenditure and services e.g. education, police, fire brigade and refuse collection etc. They are an annual cost, but can be paid in monthly instalments.

Are Business Rates important to me?

For serviced offices, rates are usually included as part of the rent.

However, if you rent longer term leased office space, business rates are a separate payment and a significant additional annual cost equating to between a third and a half of your office rent!

Can the Business Rates be challenged and reduced?

Yes. The basis of charge, the Rateable Value (RV) – an assessment of the annual rental value of an office – is reviewed every 3 years and can be challenged. The annual amount by which the RV is multiplied to produce the rates payable bill is fixed by the government and cannot be contested. This multiplier is very broadly 50p in the pound.

Does HMRC always get the Rateable Value correct?

No. The current figure is supposed to be based on the Rental Value at 1st April 2021. In many cases the HMRC had to estimate this figure and may have over pitched their answer, resulting in an overcharge to the occupier.

Is an appeal easy to lodge?

Yes, if you are conversant with the current appeal system and rating case law. Unfortunately, most businesses are not.

HEALTH WARNING: Before lodging an appeal you need to be very careful. If your assessment is judged to be too low, on appeal , your business rates could go up!

Final Thoughts

Take a look at our London office rental guide. You’ ll see how the estimated business rates bill will vary for good quality space throughout Central London.

My advice would always be to get a RICS (Royal Institution of Chartered Surveyors) qualified rating advisor to check your rating liability. You’ll avoid the pitfalls and it could result in a substantial saving. A rating advisor will probably charge based on success so if there is no saving on your rates there will be NO FEE.