National non domestic business rates, often referred to simply as business rates, are a tax on commercial properties in the UK. They are a significant cost for businesses, and understanding how they are calculated and payable is crucial for any business owner. In this article, we will delve into the world of national non domestic business rates, exploring what they are, how they are calculated, and what businesses can do to manage this important expense.
What are national non domestic business rates?
National non domestic business rates are a tax levied on most non-domestic properties, including shops, offices, warehouses, and factories. The rates are set by the government and are collected by local authorities. The revenue generated from business rates helps fund local services such as schools, roads, and waste collection.
Business rates are a major expense for businesses, often ranking second only to payroll costs. The rates are based on the rateable value of a property, which is an estimate of the property’s open market rental value on a specific date. The valuation is carried out by the Valuation Office Agency (VOA) in England, the Scottish Assessors in Scotland, and the Land and Property Services in Northern Ireland.
How are national non domestic business rates Calculated?
The calculation of national non domestic business rates is relatively straightforward, albeit with some complexities. The rateable value of a property is multiplied by the national non domestic multiplier to determine the rates payable. The multiplier is set annually by the government and is the same across England, Scotland, and Wales. However, there are different multipliers for different types of properties.
The rateable value of a property is reassessed every five years to reflect changes in the property market. This process is known as a revaluation and is conducted by the respective rating authorities in each country. The most recent revaluation in England took place in 2017, with the new rateable values coming into effect on 1st April 2017.
It is important to note that some properties are eligible for business rate relief, which can reduce the amount of rates payable. Small businesses, charities, and businesses in rural areas may qualify for relief, and there are also specific schemes in place for businesses affected by the COVID-19 pandemic.
Managing national non domestic business rates
For many businesses, national non domestic business rates are a significant cost that must be managed effectively. There are several strategies that businesses can employ to manage their rates and reduce their overall tax liability.
Firstly, businesses can appeal their rateable value if they believe it is incorrect. The appeals process can be complex, but a successful appeal can result in a lower rateable value and reduced rates payable. Businesses should seek professional advice before pursuing an appeal to ensure they have a strong case.
Secondly, businesses can explore business rate relief schemes to see if they qualify for any reductions. Small businesses with a rateable value below a certain threshold may be eligible for small business rate relief, which can reduce rates payable by up to 100%. Charities and businesses in rural areas may also qualify for relief schemes.
Lastly, businesses can consider ways to reduce their rateable value by making physical changes to their property. For example, subdividing a large property into smaller units may result in a lower rateable value and reduced rates payable. Businesses should consult with a rating specialist or surveyor to explore these options further.
In conclusion, national non domestic business rates are a significant cost for businesses in the UK. Understanding how rates are calculated, managing rateable values, and exploring relief schemes are key strategies for businesses to manage this expense effectively. By taking proactive steps to review their rates and explore potential savings, businesses can reduce their tax liability and improve their overall financial health.