Business rates

Disclaimer:  While every effort has been made to ensure the accuracy of the information contained in the Pink Book, we regret that we cannot be responsible for any errors. The Pink Book contains general information about laws applicable to your business. The information is not advice, and should not be treated as such. Read our full disclaimer.

Key facts

• Business rates generally apply to bed and breakfast establishments unless you do not intend to offer short-stay accommodation to more than six people simultaneously, and you occupy part of the property as your only or main home, and letting out the rooms is subsidiary to the use of the rest of the house as your home.
• Business rates apply to a self-catering establishment unless you offer short-term lets for fewer than 140 days a year.
• Only the part of the property used for business purposes is subject to business rates.
• Business rates apply to visitor attractions. Those that are operated by charities are entitled to a mandatory 80% reduction in business rates.
• Your local authority will calculate the business rates for your property based on its 'rateable value'.

Do I need to pay business rates?

Yes: if you are a visitor attraction or provide serviced or self-catering accommodation, unless:

1. You qualify for Small Business Rate Relief, or;

2. For bed and breakfast:

• You do not intend to offer short-stay accommodation to more than six people simultaneously, and;
• You (the owner) occupy part of the property as your only or main home, and;
• Letting out the rooms is subsidiary to the use of the rest of the house as your home (‘subsidiary’ is based on factors such as the length of your season, the scale of modifications undertaken for guests, and the proportion of the house you occupy). For example, if you only let two of six bedrooms in your property as a bed and breakfast, business rates are unlikely to apply. However, if you let four of your six bedrooms, you will probably have to pay business rates. Your local authority will be able to advise you.

Note: if you have to pay business rates, but use your property for business and domestic purposes (a composite hereditament), it is only the part you use for business purposes that is subject to business rates. The domestic accommodation is liable to council tax. Where parts of a house have a shared use, such as a kitchen or dining room, the Valuation Officer will visit the property and assess the amount to be paid (see below).

3. For self-catering:

• You offer short-period lets for fewer than 140 days a year. It is important to note that this is the period of the year when the property is available to be let, NOT the period over the year that it is actually let.

Note: the Government is currently consulting on the criteria under which self-catering and holiday lets become chargeable to business rates rather than council tax. The reason for this consultation is to ensure that owners of holiday homes are not claiming to be self-catering operators in order to avoid paying council tax.

Small Business Rate Relief

Small Business Rate Relief is available to businesses where the rateable value of the property is less than £15,000. Businesses with a rateable value of up to £12,000 receive 100% relief, while businesses with a rateable value between £12,000 and £15,000 receive tapered relief.

If you have a second property, you will keep getting any existing relief on your main property for 12 months. You can still get Small Business Rate relief on your main property after this, if both of the following apply:

None of your properties have a rateable value above £2,899.

The total rateable value of all your properties is less than £20,000 (£28,000 in London).

If your property has a rateable value of more than £15,000 but less than £51,000, your bill will be calculated using the small business multiplier, which is lower than the standard multiplier.

Note: the Government is tightening the rules on self-catering properties’ eligibility for Small Business Rates Relief. From 1 April 2023, self-catering properties are only eligible to switch from council tax to business rates if all of the following criteria are met:

a) The property will be available for letting commercially as self-catering accommodation, for short periods totalling at least 140 days in the year after the day in question.

b) During the previous year, it was available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days.

c) During the previous year, it was actually let commercially, as self-catering accommodation, for short periods totalling at least 70 days.

Note: in Wales, proposals are currently going through parliament that will require self-catering properties to be available to let for at least 252 days and actually let for at least 182 days in any 12-month period, in order to be eligible to move from paying council tax to paying business rates.

Mandatory Rate Relief for Charities

Organisations that are recognised as charities, either by being a registered charity or acknowledged by HMRC as being a charity for tax purposes, can claim 80% relief from business rates if:

• The charity (or trustees of the charity) is the ratepayer, and;
• The charity uses the property wholly, or mainly, for charitable purposes.

Any organisation that qualifies for 80% mandatory rate relief may also apply to its local council for discretionary relief for all or part of the remaining 20% of its bill.

How are business rates calculated?

If you need to pay business rates, your property will have a 'rateable value' based on the rental value of your property. These values are set by an independent government agency, the Valuation Office Agency (VOA)

The last revaluation of non-domestic properties in England and Wales took place in 2016/2017, with the new rates applying from 1 April 2017. The next revaluation will come into effect on 1 April 2023, based on rateable values from 1 April 2021.

You can obtain details of the rateable value of your property from your local Valuation Office or the Business Rates department of your local authority. The VOA website allows you to access entries in local rating lists.

Transitional arrangements

There are transitional arrangements in operation, which phase in the increase in business rates associated with the 1 April 2023 revaluation. This relief sets a limit to the percentage by which your business rate bill can increase each year.

The transitional relief is automatically included in the bill you receive from your local authority.

Challenging the valuation of a property

The VOA has introduced a three-stage process if you want to challenge the assessed rateable value of your property. The stages are:

1. Check

This is to make a change to your property details. You must provide evidence to support your changes. The VOA may accept your changes and change the rateable value.

2. Challenge

If you still think your rateable value is too high, you may then challenge it, explaining what you think it should be and provide evidence. The VOA may accept your challenge and change the rateable value.

3. Appeal

Finally, you can ask the independent Valuation Tribunal for a review if you do not agree with the VOA’s decision on the rateable value.

Seeking the advice of commercial valuers

If you feel that the valuation of your business is too high, and you are not satisfied with the advice you have received from the local Valuation Officer, you may wish to consult a private firm of valuers or rating consultants before deciding to lodge an appeal.

Before agreeing to employ any rating consultants, always confirm:

• The terms;
• Their expertise;
• Their professional indemnity insurance cover.

Fees for commercial valuers

The fees paid should depend on the amount of work needed and on whether the appeal can be resolved by agreement. If a firm is handling a number of appeals from a specific area, it may negotiate a settlement that includes all of them, which will reduce the cost of each individual case.

There have been a number of reports of 'unqualified' firms seeking to obtain rating instructions by offering to represent ratepayers on payment of a fixed fee (payable before any work is done) and 'guaranteeing' a successful outcome to the appeal. Often cold calls are made by telephone or in person to the property and you should be wary of such organisations. No one, no matter how eminent, skilled or experienced, can guarantee that an appeal will be successful.

It is also important to note that, although rare, it is possible for appeals to lead to an increase in the rateable value of your property (e.g. when the records of the Valuation Officer are not up to date on the physical extent of the property or the fact that it is being used for short-stay accommodation). Only reputable firms should be used to help you appeal against your rating assessment. Members of the Royal Institution of Chartered Surveyors (RICS) and the Institute of Revenues Rating and Valuation (IRRV) are regulated to protect the public from misconduct, and are required to hold adequate indemnity insurance.