Business rates are used by local councils in the UK to gather additional funds for services. This is upheld under the 2013 business rates retention agreements, with business rates varying based off the perceived value of the commercial property. As such, buyers can look at past business rate charges to get a clearer sense of the value of a commercial property. Learn more about valuing commercial property by utilising business rates.
The importance of commercial property valuations
Ensuring that a commercial property is accurately valued is essential to enable the conveyancing process to run smoothly, and for tax purposes moving forward. An accurate property valuation is essential for buyers and sellers to make informed decisions. This is just as important for first time buyers as it is for those who are looking to expand their property portfolio or maximise cash for future property purchases. Established property owners can use knowledge of their property’s value to inform financial strategy. For instance, having access to an accurate valuation could allow you to secure loans more easily. Obtaining professional legal advice from property experts will give you the necessary support in this area.
What are business rates?
Business rates are charged on all commercial property in the UK, even if part of the building is used for domestic purposes(mixed use property). This ‘rateable value’ is set by the Valuation Office Agency (VOA), which is linked to Her Majesty’s Revenue and Customs(HMRC). As outlined by the UK government, business rates consider ‘what it would cost to rent a property for a year, on a set valuation date’. The total charged therefore depends on size and features of the property in question, as well as various other factors. The bill is sent by the local council that govern the area.
Valuing commercial property for business rates
Any non-domestic property (business premises) will be charged business rates. The rate is set by the VOA based on what is deemed to be the open market rental value of the property. This valuation includes the following elements:
- The rateable value – estimated annual rent, profits, or construction cost. The value also considers zoning and machinery.
- The government ‘multiplier’.
- Any reliefs and reductions that are eligible.
It’s important to consider that business rates assume the tenant also pays for property insurance and any repairs during the lease. The Valuation Office Agency may alter the valuation at a later date if circumstances change. The ratepayer can also check and challenge the valuation shown in the list if they believe it to be wrong.
Conveyancing expertise for commercial properties
It is often more difficult to value commercial property to residential property, simply because the former contains business assets. This often includes tools and equipment needed to complete regular operations, some of which might add to the overall value of the property. If you are looking to purchase commercial property, Toomey Legal will provide a detailed valuation of the property that considers external factors such as business rates. Contact us if you need comprehensive legal support during the conveyancing process.