What is the rateable value of a commercial property?
The rateable value – or RV – of a commercial property essentially represents the annual rental value of the commercial property on the open market.
All non-domestic properties have a rateable value, which is fixed by an independent valuation officer from the Valuation Office Agency. Properties are revalued once every five years.
A commercial property may house a number of tenants, so each unit of property is given its own rateable value. Non-domestic properties such as shops or restaurants that also have a domestic property incorporated – such as a flat above the commercial property – are referred to as composite properties and they are valued for both business rates and council tax.
A list of rateable values is given to each local authority, from which they calculate the applicable business rates of the property.
What are business rates?
Also known as national non-domestic rates, business rates are essentially a type of tax which is applicable to business properties. The annual rate is specified by the government, with the funds collected by the local authority in which the commercial property is located.
Business rates are charged on almost all commercial – or non-domestic – properties, including:
- Pubs and bars
- Guest houses
- Holiday rental properties
Some commercial properties are exempt from paying business rates, such as farm buildings and properties used for the purpose of disabled welfare.
You will receive a bill for business rates in February or March each year, for the following tax year. Payments are usually split into ten equal monthly instalments. If you miss a monthly payment, you will receive a reminder, indicating you have seven days to pay the amount. If you do not pay within seven days, you will be liable to pay the outstanding balance that is remaining for the year.
How to calculate rateable value of a property
Business rates are calculated by multiplying the rateable value of your property by a figure that is set by the government. This figure is called the ‘national no-domestic rating multiplier’.
The amount you pay for business rates may be adjusted depending on transitional arrangements or other reliefs that you may be eligible for.
If a commercial property is eligible for business rates relief, you will pay a reduced level of business rates.
Can a rateable value change?
The valuation officer may adjust the RV of a property if the circumstances of its use have changed. The individual who is liable to pay the business rates may also ask for the RV to be changed if the circumstances of use have changed or if they believe the RV is wrong.
If the valuation officer and ratepayer do not agree on the RV figure, the ratepayer can appeal to an RV tribunal.
How to avoid business rates
If you work from home, you may still be liable to pay business rates. You should check with your local authority to determine if you are required to pay.
If a commercial property is empty, the owner will be exempt from business rates for 3 months. After 3 months, the property will continue to be exempt if the rateable value is below £2,900. If the RV is above £2,900, business rates are applicable. Empty properties are not eligible for small business rate relief.
Extended empty property relief is available if the property is:
- Owned by a charity
- A listed building
- Used as an amateur sports club
- An industrial premises such as a warehouse, which is exempt for a further 3 months