What is Small Business Rate Relief?

Introduction to Small Business Rate Relief 

The discount given on the business rates charged on a property in the UK is known as Small Business Rate Relief (SBRR). If a property qualifies certain criteria, then the business is eligible to avail of the small business rate relief. It was aimed to support the growth of small business owners by providing a reduction in the business rates on their business properties.

These business rate relief rules vary in Scotland, England, Wales, and Northern Ireland.

What Are Business Rates?

The non-business properties in the UK are subjected to a tax. These taxes are known as business rates or non-domestic rates. These non-domestic properties might include factories, warehouses, shops, offices, or guest houses.

This taxation system was introduced under the Local Government Finance Act 1988 in England and Wales. Later, it was also introduced in Scotland. Half of the revenues generated from the business rate is given to the local authorities while the remaining is transferred to the central government.

However, certain businesses can avail of a discount on the business rates of their property in the form of business rate reliefs.

What Is the Rateable Value of a Property?

The estimate of the annual rent (also known as Net Annual Value NAV) of the property is known as the rateable value of the property. The rateable value of a property is assessed on some properties. These include

• The market price of similar property
• Nature of transaction of property. For instance, the agreement of a lease or a freehold sale
• Size and location of the property

The open market value of your property as of April 1, 2015, is considered as the rateable value of your property

Who is Not Required to Pay the Business Rates?

There are certain criteria when the businesses are not subjected to pay any business rates on their property. These are

• If the rateable value of the property is less than or equal to £12000, no business rates are to be applied to it.
• Certain properties like buildings used for people with disabilities or farms are exempt to pay business rates on their property.

Non-profit organizations NGOs can apply for tax relief and they might receive 100 percent relief on the business rates of their property. For charities and sports clubs, the rate of relief can be up to 80 percent.

How To Know the Business Rates on Your Property?

To calculate the business rates applied to your property use the multiplier given in the table below. For properties with a rateable value of over £51000, use the standard multiplier otherwise use the small business multiplier.

However, while assessing the business rates for 2017-2018, use the small business multiplier for properties with a rateable value below £18,000. In London, the limit varies to  £25,500.

How To Know Whether Your Business Is Eligible for Small Business Rate Relief?

Any business can qualify for a small business rate relief if it meets certain criteria. These criteria include.

• Only one property is utilized by the business in question
• The rateable value of the property should be less than £15000.

If the rateable value of your property lies between £12000 and £15000, the small business rate relief decreases as the rateable value of the property increases. For instance, you will get less small business rate relief on a property with a rateable value of £14000 as compared to a property with a rateable value of  £13000. One can contact the local council to claim the small business rate relief on their business.

However, small business rate relief rules for a property are different in Wales, England, Scotland, and England. After your business qualifies for a business rate relief, it will be automatically reduced by the local council during the annual billing of the business rate.

Can You Get Business Rate Relief If There Is More Than One Property in Question?

A business can qualify to avail of this discount even if it utilizes more than one property. You can contact the local council of your area to find out whether your business qualifies for the small business rate relief.

If you get a second property later, you can avail of the existing business rate relief on your first property for 12 months. You can continue to get the small business rate relief on your first property even after 12 months if both the properties qualify for certain criteria. These circumstances include

• the rateable value of both the properties is less than £2,899
• all the properties of yours have a total rateable value of less than £20,000

However, in London, this limit on the total rateable value of all the properties to avail small business rate relief is £28000.

The total rateable values are calculated and if it meets the above-given criteria, you will get a rate relief on your main property.

How Much Business Rate Relief Can You Expect to Get On Your Property?

There are three types of small business rate reliefs depending on the net annual value of your property. These are listed below.

• If the rateable value of your business properties is less than or equal to  £2000, you are eligible to get a 50 percent reduction or relief in the business rates of your property.
• If the rateable value of your business properties is more than £2000 but less than £5000, you are eligible to get a 25 percent reduction or relief in the business rates of your property.
• If the rateable value of your business properties is more than £5000 but less than £15000, you are eligible to get a 20 percent reduction or relief in the business rates of your property.

Which Properties Are Excluded from Receiving Business Rate Relief Schemes?

Certain kinds of properties are excluded from the business relief schemes. These business properties include car parks, government buildings, industrial deratings, sewage plants, partially or completely unoccupied properties, contiguous properties, recreational buildings, ATMs, or more than three properties.