Written ByRobert Moore
Marketing Manager
Rob has over a decade of experience in web and general marketing. He has extensive knowledge of the Insolvency sector and has helped many worried directors with their questions.
Rob is now working with the Board at KSA Group Ltd to develop strategic marketing programmes to support the business plan and drive more company rescues.
If you can’t pay your business rates it may be because you need to get extra reliefs from your local council or even challenge the amount that you have to pay. As such, it is worth understanding what they are and how they are calculated.
Note: The business rates relief of 75% for hospitality, retail and leisure will end April 2025 and revert back to 40%.
Business rates are taxes charged on most non-domestic properties, so for commercial purposes rather than residential i.e., shops, pubs, factories, holiday rental homes. Business rates are set as a percentage of a predicted rent that the premises could be worth in the open market, if it was rented out on a yearly basis. This is variable and based on the assessment of each business, comprising multiple factors. This explains why properties located in more desirable places i.e. a busy high street, attract higher business rates.
So, if the rateable value of the property is £50,000 per year you will pay 47.9% of this value (the multiplier) in taxes.
Be aware that the rateable value is not the amount you pay, it just assists in formation of the calculation of the exact rate/amount to pay. Your local council will issue a business rates bill each year (normally February/March time) for the following tax year.
For more guidance on this you can visit the Rating Valuation page of the Government website.
It is possible to challenge your rateable value if it is incorrect. However, this is only advisable if the actual property has changed in its layout or has been impacted by other external factors such as infrastructure changes or access. Ultimately, there must be a valid reason to support your appeal.
It is advised for you to research thoroughly before contesting, especially since an appeal could work in the outcome not expected, with the rateable value increasing. So do make sure to look for the rates of similar properties in the area (here) and compare – bearing in mind the varying factors which can contribute to differences.
Currently many retailers and small businesses are facing the prospect that they will not be able to pay the business rates to their local council, often forcing them to shut up shops.
However, this does not always need to be the case. Options are available if you are struggling to pay.
Firstly, it should also be noted that there are business rate relief schemes; check if you are eligible as this could work in your favour.
For those not meeting the relief scheme criteria, if you are having difficulty with payments, the first thing to do should be to contact your local council. Of course, it is never easy to admit the struggle to pay, but it is better to be honest that not, especially since 2010, when legislation meant that landlords must pay the full business rate for empty properties. Therefore, if they do not agree to work something out to keep the tenant in, then they will be left with the bill if the long run. So, if you discuss first, some sort of agreement may be settled, outlining a payment plan going forward, in your favour.
A company voluntary arrangement (CVA) is therefore an option. This is a formal deal which allows up to 60% of unsecured debt to be written off so you have substantially less to pay back in a debt repayment plan. The local council lists as an unsecured creditor in a CVA, so a proportion of business rate debt can actually be written off.
Alternate sources of finance should be considered since new funding could free up cash flow and allow you to settle some financial commitments. See various options here.
A creditors voluntary liquidation (CVL) may be an option you resort to – this is when the company director decides to liquidate the insolvent business.
Since business rates are run by local councils, they have the power to implement measures if payments are late or not paid at all. This involves:
Just make sure to communicate with licensed insolvency practitioners like ourselves, before taking any action as we can assist with your best options and help you avoid any unnecessary consequences.
If you can’t pay business rates, VAT or PAYE, see our advice pages in the HMRC and VAT section of the website.
A landlord’s and tenant’s guide to commercial rent arrears recovery (CRAR)
For the better part of 250 years, landlords enjoyed the right to claim ‘distress’ for unpaid rent – meaning that they could seize (distrain) and sell their tenants’ goods to recoup the loss of earnings.The Rent Act 1977 stripped this right from residential landlords1, but commercial landlords continued to be able to exercise distraint until April 2014, when distress laws were replaced with the commercial rent arrears recovery (CRAR) process2, 3. So what exactly is CRAR? Like most archaic UK legislation, distress law was unnecessarily complicated and, many felt, rather unfair. The CRAR rules that supersede them are intended to be simpler and more balanced, with a greater focus on tenants’ rights than their predecessors.CRAR still allows a landlord to collect overdue rent without the need for a court order; however, it applies only to commercial tenancies, and the tenancy must be subject to a written lease. It can only be used to recover rent and any interest and/or VAT payable under the terms of the lease. Landlords: enacting the CRAR procedure Before claiming unpaid rent from a commercial tenant, you must remember the following:The arrears must be at least seven days’ worth or more at the time the notice is served and at the time of enforcement You do not have the right to seize your tenant’s goods yourself; they can only be seized by a certified enforcement agentOnce you have found an authorised enforcement agent, you will need to fill out a Warrant of Control form to enable them to begin enforcement action. The enforcement agent will then take over the process, issuing a seven day notice to your tenant in the first instance.If the rent remains unpaid at the time of enforcement, the agent will enter the property and take control of certain goods located thereon to be sold at public auction. Tenants: your rights under CRAR Firstly, you must remember that a notice of enforcement binds goods to remain on the property, meaning you cannot sell or remove them. You can, however, delay enforcement by applying to court for a delay of execution or a set aside.It is possible to enter a controlled goods agreement in order to repay what you owe over time. Under such an agreement, the goods will remain on the premises, but your landlord’s enforcement agent will be able to remove them if you default on your agreed repayments.If goods are taken, the enforcement agent must provide you with an inventory of everything seized as specified by section 33 of the Taking Control of Goods Regulations 2013.If your lease has expired, your landlord can only use the CRAR process if:the lease ended within the last six months; the lease did not end by forfeiture; the rent was owed by you at the time the lease ended; you still possess some of the goods formerly located on the premises; you occupy the goods under a commercial lease; and your old landlords was, at the time the lease ended, entitled to immediate reversionBeing unable to pay debts, such as commercial rent, when they become due is a warning sign of insolvency. If this described your company’s situation, it is highly recommended that you seek insolvency or turnaround advice from a professional firm.References1. Rent Act 1977, s 147(1)2. Tribunals, Courts and Enforcement Act 2007, s 713. The Taking Control of Goods Regulations 2013, SI 2013/1894
Read