Tax Glossary

Business Rates

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Last updated on:
March 17, 2024

Business rates are a form of taxation applied to non-domestic properties to fund local services. Charged in advance, similar to Council Tax but for commercial premises, they play a crucial role for businesses operating in physical locations.

Who Pays Business Rates?

Business rates are applicable to a variety of non-domestic premises, including:

  • Shops and cafes
  • Pubs
  • Warehouses
  • Holiday homes available for rent
  • Factories

However, certain premises are exempt from these charges, such as:

  • Agricultural land and buildings
  • Buildings dedicated to training or the welfare of disabled individuals
  • Sites registered for public religious worship and their associated church halls

Additionally, properties left unoccupied for over three months may also receive an exemption from business rates.

Self-Employed Considerations

For the self-employed, the obligation to pay business rates varies based on how the property is used for business purposes. Generally, using a part of your home as an office or for mail-order sales does not incur business rates. However, business rates may apply if your home is used more directly in your business operations, such as hosting customers or transforming parts of your home for commercial use.

Determining liability involves assessing the extent of home use for business, considering factors like the number of rooms used or hours spent working from home. It's essential that these calculations are reasonable to avoid scrutiny from HMRC.

Payment Process

Bills for business rates are typically issued in advance, around February or March for the following tax year. To understand your specific liabilities and make payments, contacting the Valuation Office Agency (VOA) in England and Wales, or your local assessor in Scotland, is advised.

Claiming Business Rates as an Expense

Fortunately, if you are liable for business rates, these can be claimed as an allowable expense on your Self Assessment tax return. This provision helps mitigate the impact of business rates on your overall tax liability, making it a critical consideration for tax planning and financial management for your business.

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