Small business rates relief – how does it work?

Business Advisor

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Small business rates relief is bit of a misnomer.  Qualification is linked to the rateable value, (ie the size), of your premises rather than the size of your business. Perhaps it should be renamed Cramped Business Rates Relief!

How does it work?

The Valuation Office Agency, (“VOA”), has assigned every commercial premises a Rateable Value (“RV”) which is linked to the commercial value on the open market as at 1 April 2015.

If a premises has a RV of £20,000 then the annual business rates can be calculated by multiplying the RV by the 2019 multiplier of 50.4% (49.1% for small businesses) giving an annual business rates charge of around £10,000.

However, where the RV is below £15,000 Small Business Rates Relief (“SBRR”) begins to apply giving a reduction in the annual charge.  Between £15,000 and £12,000 a sliding scale applies reducing from 100% to 0%.

Where the RV is £12,000 or lower, a multiplier of 0% is applied and you pay no business rates.

If you have more than one business premises, SBRR is still available on your main premises so long as:

  • None of your other properties have an RV above £2,899
  • The total RV of all your properties is below £20,000

What can I do to ensure my business benefits?

  • When you are looking for an office or other trading premises, the Rateable Value should be one of your key considerations when considering the pros and cons of each prospective location.
  • In an age where working from home combined with hot desking enables businesses to operate from smaller offices, a relocation could result in considerable savings.
  • New businesses might be tempted to take a large office with space to “grow into”. However, so long as your lease is relatively short, you would benefit from a smaller premises with a view to relocating in the future if required.  The associated business rates savings will help your fledgling business through the difficult early years.
  • You can try to be creative. If a premises is on the cusp with a rateable value of £15,000, ask the landlord whether they could split off an ancillary room such as a meeting or storage room.  Assuming that room would be attributed an RV of £3,000, it could be excluded from your tenancy reducing the RV of the retained element to the magical £12,000.  This would result in a £7,365 annual business rates saving.  Even if you end up paying for some ad hoc meeting room hire there would still be a considerable saving!

If you would like more information or advice on running your business efficiently, contact Gibson Hewitt on 01932 336149.