An important aspect towards investing in commercial property is understanding business rates. This understanding has become more imperative with significant changes that are affecting the purchase of commercial properties starting in 2017.
First, a background on business rates. These are a levy charged by the Local Authority on all non-domestic properties, such as shops, offices and pubs. You would also be expected to pay business rates even if part of a property was used for commercial purposes. For example, if you owned a building, lived in the flat above while running a shop below, you would be charged business rates.
Business rates are effectively the equivalent of Council Tax for residential properties. Subsequently, there are schemes available that offer a break from the business rates. These special circumstances include when a previous tenant has left a property empty and a new tenant has yet to be found. However, you should contact the Council for relief rather than assume it will be automatically applied.
There are also a number of non-domestic properties that are exempt from business rates, such as farm buildings, places of religious worship and buildings for the training or welfare of disabled people.
How Are Business Rates Calculated?
Much like Council Tax is calculated for residential properties, business rates are worked out on a commercial property’s “rateable value”. This means its value on the open market, currently backdated to 1 April 2008; the most recent Budget in March 2016 announced plans to update these values, but no date has been set.
Should you not agree with the valuation of your property, which determines your annual business rates, you can apply for a revaluation to be carried out. You should consult your surveyor before arranging this though, as they are most suited to assist.
Changes For Small Businesses
The most recent Budget also saw the Chancellor’s announcement that he would be widening the exemption of business rates for small businesses.
Currently, if your commercial property has a rateable value of £6,000 or less, you pay no business rates. Starting next year, the Government is doubling this relief bracket, meaning that if your business occupies a building with a rateable value of £12,000 or less, you would pay no business rates.
Furthermore, if the value is between £12,000 and £15,000, the Government would provide a tapered relief. You would still pay business rates, but at a reduced amount.
In summary, this is a big positive for small business owners in Essex, as they should soon enjoy reduced business rates, if not have their rates wiped out entirely. This could pave the way for more investment into existing commercial premises, and hopefully open the door for new businesses to set up thanks to decreased overheads.
If you have any questions about your company’s business rates, our solicitors are here to provide expert legal advice. Whether you are seeking a revaluation or guidance on commercial investments, we pride ourselves on offering a comprehensive service tailored to your needs. Get in touch on 01702 477106 to arrange a free, 30-minute consultation.
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