Small business rates relief: getting the right advice

It doesn’t add up

12 April 2016

Too many small businesses do not get the right advice about rates relief, argues Ian Sloan

Every chartered surveying practice in the country has probably received phone calls from companies claiming to be able to reduce their rates by appealing the rateable value (RV). But I wonder how many practices have themselves offered to assist their clients to claim small business rates relief? The government and local authorities need to publicise this simple but cost-effective scheme correctly.

Focusing on properties with RVs less than £12,000, a 2012 report by Bankier Sloan noted that over 95% of councils surveyed were incorrectly promoting this scheme on their websites, and as late as September 2015 only 45 out of more than 280 surveyed local authorities were promoting the complete scheme. Some were still promoting a version that had been abandoned before the coalition government came to power in May 2010.

Most chartered surveyors fail to promote the availability of the scheme when preparing sales details for small industrial units, offi•ces and shops, and thus fail to market these premises as effectively as possible. Whatever your council’s website may say, if the property is going to be a business’s sole premises and the RV is under £6,000, 100% relief is available. Tapered relief is then available up to RVs of £12,000, so a property with an RV of £8,000, for example, will attract rates of just under £1,300 a year.

Making the claim

The importance of claiming relief comes into sharp focus when it is made clear to clients that they can reclaim rates paid as far back as April 2010 if they are eligible. Understanding that businesses need to claim the relief is essential. Councils are not able by law to give relief unless at some point an occupier has made a claim. Businesses are still able to make a claim on the rates paid even when they may have vacated the premises some years ago.

At a time when councils are under ever more pressure to save money, it is important to understand that claiming relief for your clients will have no effect on local government finances. The scheme is self-funding, being paid for by the 40% of companies in England that are not eligible to claim; those businesses with RVs above £18,000 pay an additional fee of around 2% on their annual rates to subsidise the hundreds of thousands of small business that should be benefiting from the scheme.

The Treasury calculates the cost of the scheme each autumn, based on 100% of companies claiming and the associated administration costs. This total cost is then spread across the larger companies by way of an additional rate in the pound. For 2016/17 there are once again 2 such figures used by local authorities – 48.4p for small companies and 49.7p for the larger businesses – and it is this variation that allows the scheme to be self-funding.

This approach enables the Chancellor to be seen to be supporting small businesses, at no cost to the Treasury and means it is impossible for the government to lose money. In fact, it is estimated that it made over £300m in 2014/15 because of poor publicity by councils and a lack of information given to clients by many professional advisors, including chartered surveyors.

Simple solution

If you are advising any companies operating from premises with an RV of less than £12,000, ensure they are receiving the correct rates relief. Don’t accept that the non-domestic rates demand is correct, don’t rely on your council’s online figures, and don’t rely on the advice of those who call claiming they can save money. While many of them are telling the truth, because small businesses rates relief is often readily available, you simply need to email or call your council. Since April 2012, the need to complete an application form has been dropped.

The relief by its nature helps smaller businesses in poorer areas, where RVs are lowest; any refund is a financial gain for the local economy and a loss to nobody. As leading professionals in the field, RICS members have a duty to clients to seek this relief.

Ian B. Sloan FRICS is Manager, Bankier Sloan

Further information

Download a complete “Small business rates relief: getting the right advice” PDF