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What is Business Rates Relief? – Complete Guide

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What is Business Rates Relief?

Business rates relief are a tax that your business pays to your local council for the privilege of trading on premises. There may be times when you don’t pay the full amount, or at all – this is what we call rate relief.

Who can apply for Business Rates Relief?

You can apply if you operate a business in England, Wales, Scotland or Northern Ireland or in any region of the UK. You should consult with your business adviser to see whether this applies to your business.

What is rate relief?

Under the current system, local authorities charge up to 4% of the rateable value of your business on its first £11,000 of rateable value. The maximum rateable value is £12,000 for a standard home and £22,000 for a house with a loft conversion.

If the council charges less than this, then business rates are completely written off. If the council charges more than this, the business rate charge will reduce the value of the property for which it is based. The amount of business rates relief you are entitled to is based on the rates charged.

The UK government is offering Business rates relief to small business owners who are struggling. This can help you save money on your bills and reduce your stress levels! Read this blog for more information about the benefits of this scheme and how to apply for it.

How to apply for Business Rates Relief?

How to apply for Business Rates Relief

You should submit a request for rate relief within 6 months of the end of the tax year you’re entitled to the relief. Keep the receipts of all of your property’s payments and send a full request to your local authority along with copies of your business’s accounts.

Business rates relief typically covers 75% of your rateable value of your property. The rateable value of your property can be found in your business registration with your local council.

Benefits of Business rates relief

There is no doubt that the UK is a competitive business environment, but what are the benefits of Business rates relief?

  • You can claim up to £5,000 in tax-free cash each year
  • You only have to pay a small part of your bill upfront – usually around 12% or less
  • The rest is paid back over 10 years at an interest rate set by HMRC (currently 2.3%)

How to calculate rate relief?

The rate relief will vary from business to business and is based on your business type and turnover, the buildings you operate in and the types of property you use.

Your local council will then calculate how much relief you’re entitled to based on the information provided and give you an official bill, although you will need to provide a letter from your accountant stating the amount you are claiming.

  • You can claim business rates relief on two main premises (land and building) meaning you can claim relief on each property you operate from.
  • This can also be a mixed-use property.

Who is liable for unpaid taxes?

Who is liable for unpaid taxesBusiness rates are usually collected by local authorities. They charge businesses, for example hotels, pubs and restaurants, a rate based on the value of the premises on the date of your business’s last known rates (the rates are normally adjusted every three years).

When your business is no longer trading, a further assessment is made by the council based on the information they have. If the rateable value of the business has been reduced or the business has been shifted to a different address, you may have a rateable value of zero. This means the council will pay no tax on any money you make.

Advantages & Disadvantages of Business rates relief

The scheme applies to all properties, with the exception of agricultural land and buildings, that are occupied by SMEs (small or medium sized enterprises).

The advantages of business rate relief include

  • Saving money on your commercial property taxes
  • Help in keeping costs down as you won’t be required to pay any more than what you would have paid without the incentive
  • incentivising investment in economically stagnant areas
  • providing additional support for small businesses.

The Disadvantages of Business rate relief

  • Such as it not being applicable if the property is used solely for residential purposes.

Conclusion

While the public have made their complaints loudly and clearly, more will need to be done to resolve the business rates crisis. Here’s everything you need to know about how the government plans to tackle this: Are there any other options? Not really.

In all likelihood, the bill will pass through the House of Lords and if it doesn’t, then things are only going to get worse, with further reports coming from across the spectrum of businesses suffering under these changes.

One proposal that seems to be gaining steam is the introduction of a Consumer Rights Bill which would create one clear and transparent process for claiming business rates relief on the back of the “hierarchy of needs” to the end user.

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