Diversification and Business rates

There has been a recent flurry of members with rural diversified businesses being checked to see if they should have been paying Business Rates. At this time the potential of having another liability could put your business under significant pressure so before diversifying or setting your prices make sure that your business has a cushion for any potential  Business Rates.   

Business Rates is a tax charge by your local Council which is based on your business assets. It is the hypothetical rent (Rateable Value) of your business (agriculture is exempt), which is then multiplied by a factor to produce your actual tax bill. This tax bill can be subject to Small Business Rates Relief.

You will not pay business rates on the site if your Rateable Value is £12,000 or less, as the business will fully benefit from Small Business Rates Relief. To give you a feeling of what this looks like, it is approximately 20 stables, horse walker, ménage and associated buildings for an equestrian business or a 180sq m for a farm shop.

For larger properties with a Rateable Value of £12,001 to £15,000, the rate of relief will go down gradually from 100% to 0%.

Any tax liability is calculated by multiplying the Rateable Value by the multiplier 49.9 (from tax year 2021/22). So for example, a Rateable Value of £15,000 x 0.499 would produce a Business Rates tax bill of £7,485pa. It is important that you stress test your business just in case the taxman comes along. Many rural businesses such as livery yards may assume that you are exempt but this is not the case and can be a nasty shock.

Due to the scaling of relief between £12,001 - £15,000 the calculation would be affected in the following ways. If your Rateable Value is £13,500, you’ll get 50% off your bill. If your rateable value is £14,000, you’ll get 33% off. This is relevant when calculating the rough Business Rates for the business.

If you are charged backdated Business Rates it is worth checking that Small Business Rates Relief, if available, is also backdated. As many small rural diversified businesses will qualify for such reliefs. This relief is usually backdated 6 years, as per the Limitations Act 1980 but this may not be the case in certain limited cases.  

If you are looking to diversify it is important to get in contact with your local CLA office as we can help on a range of matters before you start making capital investments.