Business Rates – Solutions For Struggling Businesses

The recent hike in business rates across the UK is already causing cash flow problems for many small businesses. The problems are mainly concentrated in London where property values have risen significantly between 2010 and 2015. This has consequently increased the rateable value on commercial premises throughout the London boroughs with some increasing by as much as 46%.

Any business owner would be forgiven for thinking that an increase in the rateable value of their premises is indicative of an improving business environment that reflects increasing business. This thought, however, does not appear to materialize for the many small businesses we have spoken to in areas where the price of property has increased exponentially in recent years. Such businesses have said that trade has in fact remained stagnant as local customers have had to deal with weak wage growth as well as austerity in recent years.

How long does appealing against a revaluation take?

Appeals do take a long time to be processed as the Valuation Office Agency (VOA) that oversees them has been swamped with outstanding claims dating back to the previous revaluation in 2010, numbering around 220,000. Such a backlog is hardly encouraging for a small business owners who have recently been subjected to a significant increase in rates and hoping to get their properties re-valued in the near future.  Therefore, the question is about business rate reliefs that can provide an interim solution whilst struggling businesses await their appeals.

What about Transitional Relief?

This type of relief does offer some comfort, however, as the name suggests, it provides a period of transition by gradually increasing the business rates year-on-year. Therefore, a small business has more time to increase its revenue as required for it to maintain its cashflow as it was before the increase. To benefit from this relief a business will need to apply to the local authority and go through the necessary processes. The council does have absolute discretion in the decision-making and there is no right of appeal. Therefore, it is important to thoroughly investigate the council’s policy and procedure for the relief so that a business owner provides the correct information which illustrates the need for relief.

What about businesses that have not seen much or any increase in revenue in recent years?

Many small businesses which rely on commercial premises and which have been established for years have been operating on small profits. Many are family-owned or operating as sole traders with limited resources. For such businesses that have been subjected to significant rate increases, it is an issue as to how they will be able to manage without going into arrears. Even with the help of Transitional Relief, many businesses would struggle to make ends meet with the rates increasing periodically.

What about Hardship Relief?   

If a business is going to be threatened with running into debt or accumulating arrears as a result of a hike in business rates, there may be a solution that is known as Hardship Relief. This type of relief, if given, would reduce the amount a business pays. Like with Transitional Relief, an application will need to be made to the appropriate authority setting out the reasons why the business needs Hardship Relief. The authority does have absolute discretion in its policies and procedures that deal with this relief so again, it is vital that the criteria is examined closely before making an application.

Similar to Transitional Relief, Hardship Relief will last for a certain period, usually 1 year, whilst a business can make an application to have its commercial premises re-valued. Any extension in time would require a new application.

Small Business Relief

If your property has an rateable value of less than £12,000 per annum then your business is not affected as it qualifies for Small Business Relief. The issue for many small businesses, however, is that many that used to benefit from this relief before the revaluation, now find themselves outside of this bracket subjecting them to pay monthly business rates. The government have insisted that any such business will not pay more than £50 extra per month up to 31 March 2018. Unsurprisingly, business owners in this category are asking what kind of increase will take effect after this date.

How will my council assess my case?

Councils assess applications for business rate relief on a case-by-case basis so preventing any precedent being set for other applications. As already mentioned, local authorities will exercise their discretion in awarding relief based on criteria that can vary, but one of the fundamental matters they will assess are the interest of council tax payers. This is because for every successful business rate relief application, 70% of the revenue offset will be remunerated by central government; the remaining 30% will come from council tax.

How can my accountant help?

When assessing applications, local authorities will look for evidence that the applicant business is genuinely struggling amongst other criteria. An accountant providing a detailed breakdown of how and why an increase in business rates will put it in danger of insolvency will certainly help the application. Either way, it is highly advisable to consult your accountant if you are worried about your business’s cashflow being adversely affected by a hike in business rates.