Which farm businesses face rate rises and how to challenge valuations

Some business types in England and Wales face 30% increases in business rates, according to new values recently released on the government website.

Business rates are a property tax, with rateable values calculated for all individual, non-agricultural businesses by the government’s Valuation Office Agency (VOA).

For example, holiday lets, farm shops, workshops, warehouses, storage businesses and wedding venues would generally be assessed for business rates. 

See also: R&D tax relief – what qualifies on farm and how not to miss out

The value is based on the perceived amount the business and property would attract in rent.

Rateable values are usually reviewed every five years. The last revaluation took place in 2015, with the new charges taking effect from April 2017.

The most recent review was delayed by the Covid-19 pandemic and is based on rateable values from 1 April 2021.

These will be introduced on 1 April 2023 and are available online at the VOA’s website.

How to find the rateable value of a property

Government Rateable Value Finder

A property can be searched for using its postcode or address to produce a list of businesses in that area and their previous, current and new rateable values.

The table shows a sample of individual rateable values and changes from the government tool.

The business rate bill is calculated according to a multiplier of between 49.9p and 51.2p in the pound, equivalent to roughly half the rateable value.

Whatever the diversification, property tax experts are urging farmers and landowners to work out what rate they will pay and find out what reliefs are available.  

Exemptions and relief

Agricultural relief

Solely agricultural ventures are exempt from paying any rates.

However, it is important to note the word “solely” because any non-agricultural use of a building will make it liable for business rates, says Country Land and Business Association chief surveyor Andrew Shirley.

For example, a big barn with one end converted to a shop means the whole floor area of that building will attract the tax, he says.

As well as Agricultural Relief, a number of other tax reliefs are available.

Andrew Hulbert, head of property consultancy Harris Lamb’s business rates team, stresses that the onus is on business owners to check they are receiving the relief due. He says significant levels of relief can easily be overlooked.

Small business rate relief

This applies to businesses with rateable values up to £15,000, but different rates are applied within that range.

For farm diversifications with a rateable value below £12,000, the relief could be 100%. 

Above this figure there is a band of tapered relief up to £15,000. That means the liable party will pay a percentage of the business rate within that band.

For example, a value of £13,500 that is exactly half way between £12,000 and £15,000 would mean a 50% relief is applied to the business rates.

However, any small business rates relief is applied to a single diversification. If a business has more than one diversification, the second will pay 100% of the business rates assigned to it.

Whether a business has more than one diversification is open to some interpretation.

For example, a holiday let business with a number of units based around a courtyard may be viewed as a single diversification and claim relief.

However, two individual cottages are likely to be viewed as separate businesses, and while one could claim relief, the other cannot.

Rural rate relief

This is applied to only a certain type of businesses such as shops, pubs and garages in rural areas where the population is fewer than 3,000 people.

Charitable rate relief

Businesses registered as charities can apply for charitable rate relief of up to 80%.

It may be possible to increase this up to 100% at the discretion of the local council.

Transitional relief

The aim of transitional relief is to ease a business’s move from one rate to another when a bill change is applied. Under this relief, annual bills rise only by a fixed proportion until the new level is reached.

This should be applied automatically by the local council but again must be checked, Mr Hulbert says.

From 2023, there is an additional transitional relief to reduce the impact of bills. This is applied at 5% for businesses with rateable values between £15,000-£20,000, at 15% on rateable values from £20,000-£100,000 and 30% for those more than £100,000.

Retail, hospitality and leisure relief

This is a significant relief for businesses that fall into one of the three categories: retail, leisure or hospitality.

The system was first applied during the Covid pandemic to help businesses cope with the dramatic downturn in custom.

It was applied at a rate of 50% at the height of the pandemic but has been raised to 75% of the rateable value up to £110,000.

This is in recognition of the continuing struggle in these sectors and is in place for the 2023-24 financial year. Thereafter it will change according to political will.

What to do if the rateable value has been miscalculated

The government rate checker can be used initially to establish the rateable value of a range of businesses.

This may help highlight any anomalies before embarking on the official process known as “check, challenge, appeal”.

This process should involve expert help. A fixed fee can cover the upfront work of assessing the business and whether all of the reliefs are being claimed. Thereafter, work can be on a no-win-no-fee basis.

It is important to stress that the initial checks should be conducted diligently because it may be found that the business is underpaying, says Mr Hulbert.

In such a case, the VOA would increase the rateable value and this bill could be backdated to the previous rate change in 2017, so could be substantial.

How the ‘check, challenge, appeal’ system works

The government has set up a three-stage appeal system called “check, challenge, appeal”. Each stage must be completed before moving on to the next, explains Mr Hulbert.

The thinking is that simple queries can be dealt with at an early stage without having to progress to a full appeal.

The “check” stage is where factual information is confirmed by the ratepayer – for example, whether the VOA has calculated the rateable value on the correct floor area of the business.

The VOA aims to respond to a check within three months.

Once the first stage is complete, the business has four months to move to the “challenge” phase, where the ratepayer submits their opinion of the rateable value of the property.

The VOA then has up to 18 months to assess the challenge and respond. The challenge stage is the final time that evidence can be submitted and is arguably the most crucial.

Mr Hulbert says some challenges have fallen down on simple errors, such as missing basic information, and have been rejected after an 18-month wait. 

He suggests expert advice should be sought throughout the process. Basic searches can be carried out by chartered surveyors to assess whether the business has a case for reducing its rateable value.

Issues such as miscalculations of floorspace by VOA officials or a reduction of that area due to a business change could warrant a reduction.

If the first two stages are completed without a resolution, a ratepayer can move to the final stage and appeal to the valuation tribunal.

Successful cases could be refunded and backdated to the previous valuation change, which currently is April 2017.

Anyone who thinks their current rate may be wrong should mount a challenge as soon as possible to ensure the payments are recovered.

Once the next rate change is implemented in April 2023, all successful appeals will be backdated only to that date, says Mr Hulbert.