Small Business Rates Relief Question

[Phil.]

Afternoon all,

Hoping someone can help.

We currently have an office with a rateable value of £12,000, thus are eligible for small business rates relief.

We're looking at expanding and renting a new space, the letting agent don't have the rateable value, the annual rent for the new office is £25,000 all inclusive of bills and service charge.

I've read that if the our total rateable value is less than £20,000 (over two properties) we'll still be eligible for small biz rates relief and pay no charge. Is this correct?

If we do tip over the £20,000 mark with two properties does that mean we pay the small rates multiplier for the whole amount, i.e £20,001+ x 0.49 = £9,800. Or do we get the first £20k at zero rate and anything above that is chargeable?

Thanks in advance.

P

 

[Scalloway]

Small business rate relief on gov.uk

Business rates relief

Check if you can get a reduction in your business rates bill with business rates relief and find out how to apply.

www.gov.uk

 

[Phil.]

Ahh, I missed this titbit:

When you get a second property, you’ll keep getting any existing relief on your main property for 12 months.

You can still get small business rate relief on your main property after this if both the following apply:

• none of your other properties have a rateable value above £2,899
• the total rateable value of all your properties is less than £20,000 (£28,000 in London)

So if new property rateable value is above £2,899 (almost certainly will be), I'll have to start paying rates on both properties.

Estimated rateable value will be 20k, so circa 10k ion biz rates per year.

 

[Phil.]

Talk about a way to stifle small business growth! Would be better doing away with biz rates and charging more corporation tax for successful businesses when they can afford to pay it.

 

[Phil.]

For anyone in the know, is it easier to open up business subsidiaries when setting up new office and showroom locations? I.e, these may well benefit from small biz rates relief (as a separate entity) as we could find ourselves paying a considerable amount of business rates tax in the years to come.

Clearly we'll have to factor these rates into any expansion plans but it would be good to know what the options are.

 

[Overthehedge]

We had this issue recently, we wanted to run two different trading names under one limited company but the existing company’s premises was £2900 rateable value (£1 over their limit) so we would have had to pay business rates on both buildings, in the end we created a brand new company and both premises are under the small business rates relief value

 

[Phil.]

That's brilliant thanks Overtheedge.

Did you think about opting for the subsidiary route vs the new company structure?

In our case the new space is specifically for a showroom, it's easy for us to create a second company and it would be a net saving even after accountancy fees.

My only hesitancy is that customers do visit our main website (we're a retailer), and then they would visit the new showroom of second business which seems a little disingenuous.

Accounts could be a little messy, I.e we'd have to place orders with our suppliers via new company which would be a bit of a hassle. I guess we could just buy stock from our main company and then book the profit with the new company to save confusing supply chains, I'd have to run it past our accountants.

Thanks

 

[Paul Kelly ICHYB]

Talk about a way to stifle small business growth

So are taxes, wages, insurance etc!

You have been given help and are growing - when do you think the handouts should stop?

 

[Phil.]

Paul - I think you misinterpreted the point for your own personal bias.

Small business rate relief isn't a handout, it's a relief given to small businesses to spur growth and innovation at a time when it's needed most.

In my experience taxes such as corporation tax are a far easier levy to pay as it's not an upfront cost and hence doesn't stifle new business growth and expansion when every penny counts. This is of course different for large multinationals who have the funds for expansion and would rather pay a lower CT rate.

Unless you've worked out the how to run a business without people, wages are an essential expense and one we gladly pay, ditto employer NI contributions.

My point being, if you want a vibrant economy with lots of new business creation, limit the hurdles for start ups and small companies.

 

[Paul Kelly ICHYB]

@Phil. As someone who has helped many business get SBRR, I fully understand the importance of this and other support offered by all forms of government.

You have received some support for your business, which is great, however, because you are not getting more of the same, you criticise the system that has helped you!

You appear to be in the great position of growing, hence you need more office space, which is a wonderful thing and you need to be congratulated. However, you have reached the limit of that specific support. Rather than sing the praises of the scheme, which has kept £12k in your pocket, you state 'Talk about a way to stifle small business growth'. It doesn't have seemed to have stifled your growth so far.

These schemes have to have limits and are not bottomless pits. Imagine if your rates were a couple grand more and your support was reduced by a fair chunk, or if your rates were £15k, so you got nothing.

I am sorry if I appear a grumpy sod (which I can be), but it does annoy me when someone who has got financial support moans that they are not entitled to more - this is not specific to this post, as I encounter an awful lot every month!

Unless you've worked out the how to run a business without people, wages are an essential expense and one we gladly pay, ditto employer NI contributions.

Well, there are ways to mitigate these costs, depending on your business!

My point being, if you want a vibrant economy with lots of new business creation, limit the hurdles for start ups and small companies.

And they helped you over the rate hurdle!

 

[Phil.]

Hi Paul, a lot of assumptions on your part given you don't have any understanding of our business.

The best part is, you've not actually answered or provided guidance to the thread, rather pick out one singular sentence to justify some sort of moral high ground to question our business motives. Why even respond and participate in this discussion if not to help?

You rightly point out that I do criticise the system, if we were to open two further showrooms for example our business rates may increase from zero to potentially £45,000. That a huge sum of money for a small business to commit to when taking the risk to expand and alongside rents, staffing etc.

I stand by my earlier comment. Tax the profits, don't restrict the ambition of small businesses to expand, it stifles growth. You rightly "guessed" small rates relief haven't stifled our growth, but paying an extra 45k does make me think twice about this, it increases the risk, especially with the length of any leases. Circa £250k over 5 years is a large sum of money.

Lastly, whilst you can certainly reference my criticism of the system as a moan, I certainly haven't suggested we're entitled to more. We're not entitled to anything, we assess the business environment and conditions and plan appropriately.

 

[Paul Kelly ICHYB]

Phil,

I have made no assumptions on your business, indeed, I have congratulated you on the fact that you are growing!

Your question has been answered perfectly by Scalloway and you confirm you picked out the relevant bit.

My response was based on the following comments you made about stifling business.

I really am no one to take any moral high ground.

I was interested in reading:

You rightly point out that I do criticise the system, if we were to open two further showrooms for example our business rates may increase from zero to potentially £45,000. That a huge sum of money for a small business to commit to when taking the risk to expand and alongside rents, staffing etc.

Your business rates are not increasing from zero, they are £12k - you got support i.e. your small business has been stimulated, not stifled.

I apologise for taking the conversation (although already answered) a little off topic.

 

[felix93]

Ahh, I missed this titbit:

When you get a second property, you’ll keep getting any existing relief on your main property for 12 months.

You can still get small business rate relief on your main property after this if both the following apply:

• none of your other properties have a rateable value above £2,899
• the total rateable value of all your properties is less than £20,000 (£28,000 in London)

So if new property rateable value is above £2,899 (almost certainly will be), I'll have to start paying rates on both properties.

Estimated rateable value will be 20k, so circa 10k ion biz rates per year.

Just what I registered on this forum for. Thank you for pointing this one out. To be honest, slipped through my eyes while reading the official article.