Understanding Business Accounting For Dummies, 2nd Edition (22 page)

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Businesses and other occupiers of non-domestic properties pay Non-Domestic Rates (also known as Business Rates) to directly contribute towards the costs of local authority services. Non-domestic properties are business properties such as shops, offices, warehouses and factories, and any other property that is not classed as domestic property. In some cases, properties may be used for both domestic and non-domestic purposes (for example, a shop with a flat above it), in which case both council tax, the tax charged on personal properties, and Business Rates will be charged.

Apart from the few lucky properties such as churches, agricultural land, sewers, public parks, certain property used for disabled people, and swinging moorings for boats, which are all exempt from Business Rates, each non-domestic property has a rateable value. The valuation officers of the Valuation Office Agency (VOA) set the rateable values. The VOA is a part of HM Revenue and Customs. It draws up and maintains a full list of all rateable values.

The Valuation Office Agency carries out a revaluation every five years so that the values in the rating lists can be kept up-to-date. The total amount of Business Rates collected does not change except to reflect inflation, but revaluations make sure that this is spread fairly between ratepayers. The most recent revaluation took place in April 2005.

The rateable value broadly represents the yearly rent the property could have been let for on the open market on a particular date. Your local council works out your Business Rates bill by multiplying your rateable value by the multiplier or ‘poundage' which the Government sets from 1 April each year for the whole of England. For example, if the multiplier (which is often called the uniform business rate or UBR) was set at 44.4p and your rateable value was £10,000, the local authority would multiply this by 44.4p and your ‘property tax' bill for the year would be £4,440.

Your property may qualify for exemption under various national and local regulations or may be eligible for special reductions.

You may be able to get relief if one of the following applies to you:

Your business is small.
A UBR of 44.1p applies to certain businesses with rateable values below £5,000. The rules are complex and operate on a sliding scale.

Your property is empty and unused.
In general, there will be no Business Rates to pay for the first three months that the property is empty. After that, you will have to pay an empty property rate, which is 50 per cent of the normal bill. At the time of writing, the Government is proposing to remove the empty property rate from April 2008 and to impose a full 100 per cent rate on empty properties from April 2008.

Your business is in a rural village with a population below 3,000.
The types of business that qualify for this relief are:

• The only village general store or post office as long as it has a rateable value of up to £7,000

• A food shop with a rateable value of up to £7,000

• The only village pub and the only petrol station as long as it has a rateable value of up to £10,400

These premises are entitled to a 50 per cent reduction in the Business Rates bill, or more if the council believes you need it.

If you are a business in a qualifying rural village with a rateable value of up to £14,000, your local council may decide to give you up to 100 per cent relief, as long as your business is of benefit to the community.

You are suffering severe hardship and cannot pay your Business Rates bill.
Your local council may decide to give you up to 100 per cent relief - the decision is up to them. They normally only do this in extreme cases of hardship and for businesses which are particularly important to the local community. This takes account of the fact that local Council Tax payers will cover part of the cost of the relief.

If you think you may qualify for any of these types of relief, you should contact the Business Rates Section of your local council for more information and advice on how to apply.

Working from home

If you work from home, your local council may charge Business Rates for the part of the property used for work, and you will have to pay council tax for the rest of the property (although your property's valuation band may change). It will depend on the circumstances of each case and you should ask your local Valuation Office Agency office for advice.

Property taxes can take a big chunk out of a business's profit. In large organisations, an in-house accountant who deals with property taxes and knows the tax law language and methods is responsible for developing strategies to minimise property taxes. Small-business owners may want to consult a rating adviser. Members of the Royal Institution of Chartered Surveyors (RICS) and the Institute of Revenues Rating and Valuation (IRRV) are qualified and are regulated by rules of professional conduct designed to protect the public from misconduct.