When managing costs of commercial property, one key thing that business owners need to understand is the Valuation Office Agency business rates. Business rates can be one of the biggest components of operating costs, and yet many business owners do not understand how they are calculated, or how their payable rates are assessed. This article provides an informational guide explaining how the Valuation Office Agency (VOA) assesses business rates, what business rates are, and what you can do to mitigate your business rates liability.
What are Valuation Office Agency business rates?
Valuation Office Agency (VOA) business rates are local taxes levied on all businesses that occupy non-domestic properties in the UK, with examples such as shops, offices, warehouses, factories and even some holiday rental properties. The VOA is part of HM Revenue and Customs (HMRC) and they assess the rateable value of all non-domestic properties. The rateable value is the value your local authority calculates when determining what you owe in business rates.
Understanding your Valuation Office Agency business rates is particularly important when budgeting and planning costs for your business, and helping you understand whether or not your business is overpaying on property tax.
How the Valuation Office Agency Calculates Business Rates
In order to understand your Valuation Office Agency for business rates, you need to understand how to establish the rateable value. The VOA will give a rateable value to every commercial property and there is a formula that attempts to establish how much it could be let for on a specific date (is known as the Valuation Date) and it will be the sum of the annual rent.
Aspects taken in to account in the VOA assessment:
- Location of the property
- Size and number of rooms
- Type of property and how it is used
- Local market conditions
- Any alterations or adaptions
The current rating list (at the date of this document) is based on rental values as at April 202
The Importance of Understanding Your Business Rates
For many small and medium-sized businesses (SMEs), business rates from the Valuation Office Agency (VOA) will form a higher percentage of fixed operating costs. Misunderstanding or failing to understand how business rates work can cause you financial hardship or even worse, overpaying rates! Here’s why it’s important to know your business rates:
- Being Clear on Your Budget: Having clarity on what you owe, will help avoid cash flow issues.
- Identifying Over valuated Properties: Understanding how your property has been valued is the first step in challenging any inaccurate valuations, which is your first step to reduced costs.
- Making Use of Relief Schemes: Many businesses qualify for small business rates reliefs or temporary reduction.
Common Misconceptions About Valuation Office Agency Business Rates
There are many misconceptions that business owners have about Valuation Office Agency business rates. Here are just a few.
1. Business rates are set by local councils.
While it is true that the local council collects the business rates, the VOA is the responsible body for assessing the rateable value of the property. Conflicting valuations are through the VOA and not the local council.
2. All businesses will incur the same business rates.
That may sound reasonable but that is not true. There are a number of issues that vary business rates; rateable value, rates relief schemes and lot size, etc.
3. You are unable to challenge business rates.
That is actually incorrect. You are able to ‘challenge’ rates balance based on the rateable value specifically by using the Check, Challenge, Appeal (CCA) system, directly through the VOA.
How to Dispute Your Business Rates Assessment
If you think your Valuation Office Agency business rates are too high; you have the right to make an appeal. The process involves three stages:
- Check: Check out your property in the VOA’s online system.
- Challenge: Make a formal challenge and provide supporting information (e.g. rental comparisons, change of use).
- Appeal: If you are unhappy with the result, you can take your case to an independent tribunal.
Reliefs and Exemptions – Cut your Business Rates
Another reason to get your head around Valuation Office Agency business rates is to ensure that you do not miss out on potential cost savings. You may be eligible for several reliefs and exemptions:
Small Business Rate Relief (SBRR)
When a property’s rateable value is fewer than £15,000, you may qualify for SBRR. If a property has a rateable value of fewer than £12,000, there is usually 100% relief.
Rural Rate Relief
In England, and Wales, there is potential for a discount if your business operates within a rural community of fewer than 3,000 residents, and your business is an essential service to the local area, for example, the only shop, or Post Office.
Charitable Rate Relief
If your organisation is a registered charity, or an amateur athletic club, then you may receive up to 80% relief, with the ability of councils to grant more.
Empty Property Relief
If your property is empty for a small period of time, you may not have to pay Valuation Office Agency business rates.
Revaluation: The reason it is important to your business
The Valuation Office Agency (VOA) revalues properties every few years for the purposes of property detailing and keeping pace with changes in the property market. The most recent revaluation came into effect in April 2023. This last revaluation could have a significant impact on the Valuation Office Agency business rates:
- Increases: If local surroundings have become more commercially valuable, you could expect to have a higher rateable value.
- Decreases: If your local property market has diminished, it is possible to be paying lower rates.
It is vital that you track any revaluation announcements as well as understand how these will affect your business financials.
Ideas to Reduce Your Business Rates Burden
Managing your business rates from the Valuation Office Agency does not have to feel heavy! Here are a few useful ideas:
- Regularly Review Your Rateable Value: Check the VOA online and validate your property details using their tools.
- Keep Property Details Current: Notify the VOA when you’re prepared to make amendments to property plans.
- Involve a Rating Surveyor: If you’re concerned that your property has a higher value than it should be (or an increase in rates will put you in that position) a surveyor might help.
- Plan Your Budget with Rises in Mind: Make sure to budget for possible increases in rates.
- Claim Reliefs if They Are Available: Don’t leave money behind when you can apply for reliefs for which your business might be entitled.
What does the Future Hold for Valuation Office Agency Business Rates?
The business rates system is constantly under review, with an endless list of concerns in regard to fairness and its impact on the high-street retail industry. Some of the potential reforms include:
- Shorter revaluation periods (3-year periods versus the current 5 yearly)
- Easier processes for appeals
- Changing VOA systems purposefully to a more digital/data-based format
As the world continues to develop further, the need to keep track of Valuation Office Agency business rates will become more important than ever before.
Conclusion: You Hold the Key to Your Valuation Office Agency Business Rates
It is common knowledge that the Valuation Office Agency business rates can seem complicated and unapproachable, but you should equally acknowledge that it’s way more than just a legal requirement. Whether you provide small- to wide- ranging shop or multiple offices or provide services to the general public, knowing where you stand can make it much easier to save money, lessen disputes, and assist with planning.
This also includes funding checks that prove taxing in certain circumstances.
So why not start now? You could tell me what I’m doing sounds blindingly obvious, but I can guarantee there will be things in the report on your property’s rateable value, the search for any reliefs you’ll be able to claim, or the costs of employing a professional to do a qualified valuation review, depending on your own circumstances, that will help your business make sure it’s paying its fair share — and not a penny too much.
