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Sarah Bradford reveals how business rates are worked out and how your business could benefit.

Introduction

Where all or part of a building is used for a business, the business will generally have to pay non-domestic rates. These are often referred to as business rates and go towards funding services provided by local authorities.

Rateable Value

The amount of business rates payable is calculated by reference to the rateable value of the property. The rateable value of the property is based on the likely open market value of the property at the revaluation date and updated every five years.

The values were last updated on 1 April 2005, based on market rents at 1 April 2003. The next revaluation will take effect from 1 April 2010, based on market rents on 1 April 2008. The 2010 valuations are available on the Valuation Office Agency website.

Businesses are advised to check their valuation prior to April 2010. Although it is not possible to appeal against the 2010 valuation until 1 April 2010, the Valuation Office Agency advises businesses that think the rateable value is wrong to contact them directly prior to starting an appeal. Contact details are available on the VOA website.

How is the Rateable Value Worked Out?

The rateable value assigned to a property reflects a number of factors, such as the size and location of the property and how the property is used.

The amount of business rates payable in respect of a property is found by multiplying the rateable value for the property by the multiplier for the year. For 2009-10, the multiplier for England is 48.5. This means business rates of 48.5 pence are payable for every £1 of rateable value, such that the business rates for a property with a rateable value of £9,000 would be £4,365 for 2009/10..

Small Business Rate Relief

However, the availability of a relief can reduce the business rates payable by a small business. Small business rate relief is available to small businesses that only occupy one property in respect of which the rateable value is not more than £15,000 (or £21,500 in London). Although there is a one property limit for entitlements to small business rates relief, any additional properties with rateable values of less than £2,200 are not taken into account.

Where small business rate relief is in point, business rates are calculated by using a small business multiplier rather than the standard multiplier. For 2009/10 the small business multiplier is 48.1. Further relief is then given by reference to the rateable value, where the rateable value is £9,999 or less.

If the rateable value is less than £5,000, the business rates, as calculated using the small business multiplier, are reduced by 50%.

Where the rateable value of the property is between £5,000 and £9,999, the reduction starts at 50% where the rateable value is £5,000 and decreases by 1% for each additional £100 of rateable value. This means that the reduction for a rateable value of £5,500 is 45%, £6,000 is 40%, £6,500 is 35%, £7,000 is 30% and so on.

Properties with a rateable value of between £10,000 and £14,999 (or between £9,999 and £21,499 in London) pay business rates by reference to the small business multiplier of 48.1. There is no further reduction.

No Need to Re-Apply

It used to be the case that where a business benefitted from small business rate relief, they needed to reapply for the relief at each revaluation. However, this will not be necessary at the 2010 revaluation and bills will be amended to reflect any changes in the rateable value.

Empty Properties

Empty properties also benefit from business rate relief, but only for a temporary period, and only if the rateable value is less than £15,000. Until 31 March 2010, business rates are not charged for the first three months that a business property is empty. For Industrial and warehouse properties, the exemption period is six months. After that, business rates are payable as normal.

The above article is taken from Tax Insider, TaxationWeb's own publication specifically for our Taxpayer visitors. Tax Insider is a monthly magazine containing numerous tax tips, articles, questions and answers from leading tax experts, aimed at helping taxpayers to save and reduce tax liabilities.    

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