Business rates, also known as company rates, are a tax on land use for non-domestic reasons. In other words, if you use a property for other than living purposes, you must pay business rates.

A tax on land used for commercial purposes is known as business rates. Business rates are imposed on offices, stores, restaurants, and warehouses; in fact, several non-domestic properties are subject to them.

They can also be paid if only a portion of a structure is used for non-domestic purposes.

When to pay business rates?

Non-domestic assets are typically subject to business rates. The following are examples of non-domestic properties:

  • Cafes, shops, and pubs.
  • Offices, warehouses, and production plants
  • Holiday vacation homes or guesthouses.

If an individual uses a house, or a section of a building, for non-domestic purposes, they must pay business rates. Business rates are an allowable expense for tax purposes if an individual is expected to pay them.

How to measure business rates?

The ‘rateable value’ of a property is used to measure business rates. 

You can measure your business rates by multiplying your property’s rateable value by the required multiplier that is an amount fixed by the central government.

The rateable value also calculates the multiplier an individual uses to measure business rates. A standard multiplier is applied to properties with a rateable value of more than £51,000, whereas a small business multiplier is applied to properties with a rateable value of less than £51,000.

Wales and London have different multipliers than the rest of England.

The rateable value of a property is multiplied by the multiplier to assess its business rates in England.

For example:

ABC company has a rateable value of £20,000 and should therefore be compounded by the small business multiplier.

This was 49.1p (£0.491) in the 2019-2020 fiscal year. It’s then easy to measure his basic market rates: £20,000 x £0.491 = £9,820.

Business rates exemptions

The following assets or properties are excluded from paying business rates:

  • Land and infrastructure used for agriculture activities.
  • Buildings that have been designated as places of public religious worship or as church halls
  • Buildings that are used to promote disabled people’s welfare (such as buildings used for training people in disability welfare).
  • Empty premises are excluded from paying business rates if:
  1. It’s a listed premise.
  2. It has a taxable value of less than £2,900.
  3. A charity owns it, and its next intention of use will be charitable.