SMEs won further concessions on business rates in last month’s budget. Read on to ensure you understand what you should be paying – and how to claim relief if you qualify.
Research from the Federation of Small Businesses shows business rates are the third biggest cost for SMEs after staff and rent. The Chancellor’s announcement of business rate reform in last month’s Budget is therefore good news for smaller firms. In our most recent Close Brothers Business Barometer survey, one in seven firms said the extension of small business rate relief would have a greater positive impact on their business’ growth than anything else.
Overall, the Treasury estimates that from next April, around 900,000 SMEs will be paying less (or nothing at all) in business rates. But it’s important to understand how the system works - and what is changing - so you can ensure you’re getting the support your business is entitled to.
Business rates in 2016-17
Currently, all companies occupying premises are potentially liable to pay business rates to their local council. How much they pay depends on the ‘rateable value’ of the property, which is set by the Valuations Office Agency (VOA) according to its estimate of the premises’ rental value on the open market. You can check that your local authority has the correct rateable value for your property on the VOA’s website.
Small business rates relief is currently available to firms working from properties with a rateable value of less than £12,000. Under this relief, SMEs in premises with a rateable value below £6,000 will pay no rates at all. For those between £6,000 and £12,000, a tapering system applies, so that the relief gradually reduces from 100% to zero on properties with a rateable value of more than £12,000.
From 2017-18 onwards
Organisations such as the British Chambers of Commerce have been campaigning for reform of business rates. As a first step, in last month’s Budget the Chancellor announced that, from April 2017, the threshold to which 100% relief is available will be doubled to £12,000, with the tapering system then applying on properties with rateable values of between £12,000 and £15,000.
In other words, if your business is currently paying no business rates, it will now continue to do so for the foreseeable future. If the business is currently eligible for tapered relief, this will increase to 100% relief from next April onwards. And if your business is currently in premises with a rateable value of between £12,000 and £15,000, it will now be eligible for at least some relief for the first time. It is important that you check the rateable value of your premises so that you can start to claim support that you may not have previously been eligible for.
How to claim small business rate relief
Your SME’s business rates are set by your local authority and it’s this organisation that you need to contact in order to claim small business rate relief. You should only need to do so once, with the relief granted automatically thereafter.
However, the Forum of Private Business suggests as many as 50% of SMEs in some parts of the country are missing out on relief to which they’re entitled. For many SMEs, this will represent a substantial sum foregone, so it is vital that you check you are receiving what you are due.
Finally, if you’re getting the right bill and are struggling to make payments on time, it is a good idea to look at your funding and cash flow. Consider all forms of funding, including alternative solutions such as invoice finance, which is ideal for successful businesses that have challenges with cash flow.
Rising energy bills
Despite plunging oil prices, the British Chambers of Commerce says that rising energy bills have become an increasing concern for many SMEs over the past 12 months. There are a number of ways in which SMEs can cut their energy bills, in our recent blog post we share six options to consider.
