Who pays business rates, landlord or tenant?
A common question we often hear comes from tenants wondering precisely who is in charge of paying business rates.
This really does depend upon the person or company who are occupying this building at the time or if the building in question is unoccupied.
This article will discuss the key things that you need to look out for when questions arise over who is in charge of paying.
Business Rates are payable on almost all non-domestic/commercial properties such as shops, offices, warehouses, units, land used for storage and other commercial purposes. Typically, Business Rates legislation states that the person entitled to possession of a property is liable to pay business rates charges. The person entitled to possession will usually be the leaseholder or the owner of the property.
Something to note is that business rates are handled differently across the UK.
Your local council will send you a business rates bill in February or March each year. This is for the following tax year. You can also estimate your business rates bill.
You can get help with business rates from your council if you have questions about your bill and the Valuation Office Agency (VOA) if you think your ‘rateable value’ is wrong.
The occupier of the premises is responsible for paying business rates.
This will usually be the owner or the tenant. Sometimes the landlord of the property charges the occupier a rent that also includes an amount for the business rates.
It remains a private matter between the landlord and occupier to decide who is responsible for making payment. However, the bill will remain in the occupier’s name, and if it is not paid, action may be taken against the occupier, not the landlord, to recover the amount due.
With a rise in working from home, there has been an increase in discussion revolving around business rates on home-run businesses.
You do not usually have to pay business rates for home-based businesses if you:
use a small part of your home for your business, for example, if you use a bedroom as an office, sell goods by post, although if you sell goods or services to people who visit your property or you employ other people to work at your property, you may have to pay.
Characters occupied by charities are entitled to an 80% mandatory business rate relief, while non-profit organisations can apply to the local billing authority for discretionary relief of up to 100%.
All unoccupied properties are subject to business rates charges unless a Business Rates Relief applies.
In cases where empty Business Rates are due, the person or company entitled to possession will be liable for the empty charge.
Vacant property rates are charged at the total sum after a starting three-month exclusion. This exclusion period is expanded to six months for industrial properties such as production lines, workshops and warehouses.
The exception is based on the property’s circumstances instead of the liable individual. If a new proprietor takes over a property that has been vacant for over three months (or six months on the off chance that industrial) and keeps it empty, the 100% vacant rate is charged right away.
You must inform the government immediately if an unoccupied home finds a tenant, in writing if possible, giving full details of what has happened.
There will need to be some correspondence as the relevant authorities need to know who has become the new owner or occupier and on what date. Once they know this, a new business rates bill can be sent out lawfully.
Remember to register for business rates. You should contact a well-reviewed firm of rating surveyors who can contact the local council to inform them of your occupation if it is a new site that needs to be assessed.
Or, you can check your business rates on the VOA website, as we mentioned previously. You can compare properties with similar size, locality and market to your property. However, business rates can be very technical and confusing, and there are a lot of legal statutes and rules to adhere to when appealing. Therefore, we highly suggest that you get in contact with a representative to assist you if you need advice.
So, Who Pays the business rates?
Occupiers of commercial properties will generally receive a rate demand from their local billing authority in April as mentioned above, and you will have the option of paying business rates in monthly instalments.
The occupier of the property should pay business rates; if you are a tenant, check with your landlord whether business rates are included in your lease. It is too important to miss! Remember, there will only be one bill, if the tenant is not paying, the landlord must be taking responsibility, and vice versa.
Other useful links from our knowledge centre:
What is a micro business?
What does SLA mean in business?
Is a charity a business?
Remember to Compare Your Business Costs is here to help your business every step of the way from business advice, or saving you time and money on your business purchases such as: