Business Rates Advice/Help

[Lifestyle18]

Hi,

I have a small warehouse for stock holding of around 2000 sq/ft which was receiving some business rates relief. I have just taken over another same size unit elsewhere for the sole purpose of holding stock. But since doing so I have lost the relief on the first unit and now pay the full business rates on the 2nd unit. Therefore I am now paying an additional £8,000 a year in business rates which has caught me a little off guard!
The newest unit would receive full business rates relief if it were a separate business so my first thought was to create a second business. But I am not sure if I could even do this and generate enough profit to cover rent.

Could I create a showroom area to get any relief?

Any suggestions would be greatly appreciated.

Thanks

Bob

 

[Gyumri]

Under what grant scheme were you able to qualify for relief. That might determine whether you need to set up a separate entity. Generally if both entities are controlled by the same people that may disqualify you anyway so it would be back to the drawing board.

 

[Lifestyle18]

Under what grant scheme were you able to qualify for relief. That might determine whether you need to set up a separate entity. Generally if both entities are controlled by the same people that may disqualify you anyway so it would be back to the drawing board.

It was just the business rates relief whereby under 12,000 rateable value it is exempt.

 

[kulture]

Small Business Rate Relief, as you have noted, is only available if you have just ONE property. If you had two companies, each with one property, then you will get relief on both. If you leased one of your properties to a second company which then was liable for rates, both companies would get relief. There is no provision in the rate relief regulation that says that a company has to be profitable, nor that the rent has to be at market rates....

 

[lesliedocherty]

Hi,

I have a small warehouse for stock holding of around 2000 sq/ft which was receiving some business rates relief. I have just taken over another same size unit elsewhere for the sole purpose of holding stock. But since doing so I have lost the relief on the first unit and now pay the full business rates on the 2nd unit. Therefore I am now paying an additional £8,000 a year in business rates which has caught me a little off guard!
The newest unit would receive full business rates relief if it were a separate business so my first thought was to create a second business. But I am not sure if I could even do this and generate enough profit to cover rent.

Could I create a showroom area to get any relief?

Any suggestions would be greatly appreciated.

Thanks

Bob

We had the same problem a few years ago, the answer I got from the Rates office was to do the 2nd unit under a different company and you get full relief on both units

 

[Lifestyle18]

Small Business Rate Relief, as you have noted, is only available if you have just ONE property. If you had two companies, each with one property, then you will get relief on both. If you leased one of your properties to a second company which then was liable for rates, both companies would get relief. There is no provision in the rate relief regulation that says that a company has to be profitable, nor that the rent has to be at market rates....

Thanks for the response. So just to clarify I could set up a second company ( a simple sole trader) and sub let the second property to this business. And I could then contact the council to apply for business rates relief on both? It seems too obvious . but if that is acceptable and it won't come back to bite me then I would certainly go down this route.

 

[kulture]

They have to be seperate legal entities. It also helps if both companies have different registered office addresses (like say, the units). It should not matter, but it does help if the two units are in different council areas. It will also help if there was a diferent person responsible named for each company.

It may help in the future if you could establish a business reason why you have two companies.

 

[Lifestyle18]

We had the same problem a few years ago, the answer I got from the Rates office was to do the 2nd unit under a different company and you get full relief on both units

Hi Leslie, Thanks for this. But did you have a second trading company that could afford the rent on the second property? Or did you register a second company for this purpose? I'm just not sure if I started a second company how it would afford the rent.

 

[Lifestyle18]

They have to be seperate legal entities. It also helps if both companies have different registered office addresses (like say, the units). It should not matter, but it does help if the two units are in different council areas. It will also help if there was a diferent person responsible named for each company.

It may help in the future if you could establish a business reason why you have two companies.

Unfortunately the Units are on the same Industrial estate. If I had a separate business that sold a completely different product then perhaps this would be acceptable. But if the first company sub lets the second warehouse out at a very low rate then I guess that might bring into question the reason for the second company....

 

[kulture]

The real question is why would the council ask, and if they did, would what you are doing be illegal? If it was illegal then clearly you should not do it.

I know some businesses have separate companies for each shop, mainly to limit the liability if one did poorly. Likewise separate companies for each lease can make it easier to offload one if times get bad.

 

[Gettingthereslowly]

I think its a great idea that in addition to your main retail business, you have decided enter the self storage market. Lifestyle18 Storage Company. Please let me know your storage rates, I might be interested. Ah I see, quiet reasonable, quiet small scale, that's why you haven't hit the VAT threshold also on the new business. Worked out quiet well for you. It could also be advantageous from a Disaster Recovery point of view, in case 1 of your units has a problem, or heaven forbid we have some other biological Lockdown and the government of the time decided to hand out fixed business support packages. I wish I was as entrepreneurial as you.

 

[lesliedocherty]

Hi Leslie, Thanks for this. But did you have a second trading company that could afford the rent on the second property? Or did you register a second company for this purpose? I'm just not sure if I started a second company how it would afford the rent.

All the council wanted to see was a lease agreement with a different company name, it had to be registered in the correct place, but the council didn't/don't care.

This was in Scotland, so England may be different.

 

[Lifestyle18]

The real question is why would the council ask, and if they did, would what you are doing be illegal? If it was illegal then clearly you should not do it.

I know some businesses have separate companies for each shop, mainly to limit the liability if one did poorly. Likewise separate companies for each lease can make it easier to offload one if times get bad.

Thank you for all the responses and advice. It is greatly appreciated.

 

[Lifestyle18]

All the council wanted to see was a lease agreement with a different company name, it had to be registered in the correct place, but the council didn't/don't care.

This was in Scotland, so England may be different.

Thanks for taking the time. I really appreciate the responses.

 

[HFE Signs]

As mentioned, the only way around this is separating the company, obviously this will additional incur accounting fees

 

[Telson]

Hi, if a building has been split into more than one small office, is it mandatory to inform council and change the rateable value? would it be beneficial.
We pay nearly £900 as business rates for our commercial building. we plan to let the rooms to small offices. Each office area would be less than 12000 rateable value, as our whole property rateable value is only 17000.
Is it mandatory to inform the council to let to small offices? Can we continue to pay the full business rate and charge a part from the tenants.
which one would be profitable, assuming there would be difficulty to get tenants to occupy rooms. when we split the building into different suits, or small offices, if it is empty, does the landlord needs to pay more rate than we pay now?
eg. if we split it into say 5 tenants, each rateable value would be less than £8000. None of us need to pay business rate. Does the landlord need to pay business rate which is more than we do now, if all the building is empty?
Can you please advice.