Business rates, commonly known as non-domestic rates, are an annual tax on the income of non-domicile land. Rates were a customary property tax with medieval origins, which was originally used to finance the communal service of formalized local public works. The first survey of the rates was begun in the twelfth century. It replaced the previously assessed communal rates and was replaced in the eighteenth century by the modern Rates. Today they are an important mechanism for enabling English taxpayers to assess their property tax liability and pay it in full at the appropriate rate.
There are two basic methods of calculating business rates: the reg and revaluation process. Both use modern techniques based on historical data and current market appraisals to assign a new rate to previously assessed properties. Although the traditional method remains in place, it has been made easier by the introduction of new software designed specifically for the purpose. These programs enable the valuation to be carried out accurately and provide valuable inputs for the valuation. Revaluation is based on recent sales prices of similar properties and businesses.
Property owners can use business rates reliefs to minimize their annual tax bill. When the property is bought, owners usually pay a fixed rate. Over time, as the property is built up in equity, the owner can elect to pay business rates reliefs on an annual basis or to capitalize the investment and pay it off completely. This ensures lower taxation on subsequent years.
Owners can benefit from the use of business rates reliefs to realize a profit. These come in the form of a discount on the rate of return of their investments. As a result of this discount, profits are passed along to the investor. In many cases, it is possible to purchase properties in counties that are exempt from local taxation. Properties located in these jurisdictions receive the highest tax breaks in comparison to those situated in counties that are subjected to local taxation. For investors who are aware of these special tax rates, this is a great opportunity to realize a substantial profit on investment properties that they hold.
Business owners also have the option of capitalizing on their existing assets in order to realize a profit on properties that are located within their town. Investors can get a valuation details of such properties from the local council before making a decision to invest. Valuations will take into consideration existing infrastructure, current market prices, land use and traffic patterns. If the valuation details indicate that a particular business or investment property is undervalued, you can use business rates reliefs to make an even better deal.
Another advantage of using business rates relief is the option of paying small business rate reliefs on commercial mortgages. This is beneficial for the lenders as well as the commercial mortgagee. It is not uncommon for small businesses to acquire commercial mortgages that are difficult to pay due to the steep rise in the value of real estate. A council tax expert can help a borrower find commercial mortgage options that he or she may qualify for.
There are several factors that can affect the value of your commercial properties and are used by business rate experts to calculate your potential rateable values. Some of these factors include the location of your properties, the existing infrastructure and value of the land used for establishing your business. Factors like these have an effect on how the council calculates your property’s potential rate. The most common type of calculation used by most councils is a multiplier. Business rates multiplier determines the increase in taxes your business would be eligible to enjoy under the rateable value plan.
The council will also consider the age and health of the people living in the properties when calculating your potential rate. The presence of disabled people in the property, the ages of the people who are renting the properties, and the ages of those who live in the property can all contribute to the amount of the rate you will be paying. Another factor considered by the council is the impact of new development on the surrounding area. Areas that are most prone to developments will attract higher rates. For instance, areas near shopping centres and universities usually have higher commercial properties’ rates because they are considered ‘developed’.