Key facts

  • Business rates apply to bed and breakfast establishments unless the business does not intend to offer short-stay accommodation to more than six people simultaneously AND the owner occupies part of the property as their only or main home AND their letting out the rooms is subsidiary to the use of the rest of the house as the owner’s home.
  • Business rates apply to a self-catering establishment unless it offers short-term lets for fewer than 140 days over the period of a year.
  • It is only the part of the property used for business purposes that is subject to business rates.
  • The business’ local authority will calculate the business rates based on the ‘rateable value’ of the property.

Do I need to pay business rates?

  • Yes: if you are providing serviced or self-catering accommodation and do not fall within any of the ‘nos’ below.
  • No: if you have a bed and breakfast establishment and: do not intend to offer short stay accommodation to more than six people simultaneously
  • you (the owner) occupy part of the property as your only or main home
  • letting out the rooms is subsidiary to the use of the rest of the house as your home, eg the length of your season, the scale of modifications undertaken for guests, the proportion of the house you occupy.
  • No: if you have a self-catering establishment and offer short period lets for fewer than 140 days a year.

Note – business and domestic use! 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, a decision will be made by the Valuation Officer visiting the property to assess the amount to be paid (see below) on whether a particular room is included as business or domestic property, but no use will be counted twice.

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).

Your local authority will calculate your business rates by multiplying the rateable value of your property by a multiplier or ‘poundage’ set each year by the government.

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: www.voa.gov.uk.

Transitional arrangements

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

As an additional relief, under the plans proposed in the 2010 Budget, businesses with a rateable value of up to £6,000 a year will be exempt from paying any rates at all for 12 months, with partial relief for properties rated up to £12,000 a year.

Lodging an appeal

You can make an appeal against the 2008 valuation of your property at any time during the five-year life of the valuation, ie until April 1, 2015. However, you are advised to appeal as soon as possible as you will have to pay your rates in full until a decision has been reached and, for most appeals, there are limits on how far any resulting change in value will be backdated.

Appeals are made in the form of a ‘proposal’ to the local Valuation Officer or online through the VOA website. If an agreement is not reached within 3 months of receipt of your proposal, it will be automatically referred to the local Valuation Tribunal that will hear the case and give a decision.

Appeals have been known to take several years to resolve. However, new procedures were introduced on 1 April 2000 aimed at improving the system. These include providing better, more timely information about how your property valuation was reached, and introducing a timetable for the resolution of appeals, so you know when your appeal should be resolved.

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.

Unfortunately 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 are best advised not to employ such organisations. No one, no matter how eminent, skilled or experienced, can guarantee that an appeal will be successful.

It is possible for appeals to lead to increases in rateable values, eg 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.

Further guidance

  • For information on the valuation of your property or appeals, contact your local Valuation Office (listed in the telephone directory), or visit their website: www.voa.gov.uk.
  • For any enquiries about your business rates bill, contact the business rates department of your local authority.

For a factsheet form the Valuation Office on the 2010 revaluation process, visit http://www.voa.gov.uk/business_rates/Revaluation-2010/Revaluation-2010-Fact-Sheet-English.pdf

You can find more information about what to do if you disagree with your rateable value on the Valuation Office Agency website.

A comprehensive online guide to business rates is available at www.businesslink.gov.uk.