End of business rates discount: what you need to know
With the end of discounted business rates for community pharmacies looming, accountant Vinku Shah explains what contractors' next steps should be.
The current 66% discount on business rates will come to and end on 31 March 2022, leaving community pharmacy owners fearful of facing the full business rates costs on top of rising overheads like energy and staffing costs that have already been a burden.
All business properties are assigned a “rateable value” determined by the Valuation Office Agency, which is based on a property’s annual market (not actual) rent, size and usage. The business rate is the rateable value multiplied by the business rate multiplier.
The Autumn Budget included an announcement that for 2022/2023, a 50% relief will be available to eligible retail, hospitality and leisure properties. The business rate multipliers have also been frozen at 49.9p for the small business multiplier and 51.2 for the standard multiplier. If your business had a rateable value of less than £51,000 in England, your bill will be calculated using the small business multiplier.
Small business rate relief
A number of pharmacy contractors are eligible for small business rate relief, where the premises' rateable value is less than £15,000 and the business uses only one premises. If the rateable value is £12,000 or less, then the business will receive 100% small business rate relief. For businesses with rateable value of £12,001 to £15,000, the rate of relief will gradually go down from 100% to 0%.
We would advise all pharmacy contractors to check their business rates and confirm that the rateable value has not increased and that the 50% relief has also been applied on their 2022/2023 rates bills up to a maximum of £110,000 per business.
For second business premises, relief will only be due if the rateable value of the main premises is less than £15,000 and less than £2,899 for each of the additional premises, and if the total combined value is less than £20,000 (£28,000 in London).
What should pharmacy contractors do to ensure the correct rates are being charged?
- Check the rateable value. Is the rateable value more than the actual rent paid? If so, there may have been an overvaluation of the premises' rateable value
- Check the summary valuation attached to your ratings assessment entry in the rating list and check that the areas your business has been valued on are correct
- If there is a change in the local area such as building works or planned road closures, you may be able to apply for a temporary business rate reduction
- If you are not sure about the rates, then it may be worth getting a professional rating specialist to assist. There are a number of specialists who charge only upon successful reduction of rates, so there will be no cost if they are unsuccessful.
Changes from April 2023
The government has also announced a 100% improvement relief for 12 months from April 2023 to 2028. This relief will protect businesses from additional rates charges where improvements to premises increase the rateable value.
This could help, for example, where a pharmacy has been refurbished or a new CCTV camera has been installed because these would result in an increase in the rateable value. This could also be beneficial for fit-out works and other investments that attract corporation tax relief through the annual investment allowance. This could help offset some of the additional expected cost in the following year.
From April 2023 until 2035, the government will introduce an exemption for eligible plant and machinery used in onsite energy generation and storage, for example, rooftop solar panels, electric vehicle charging points and battery storage used with renewable energy.
The government is also following through with plans to implement business rates revaluations every three years, starting from 2023 instead of the current five-year cycle. Therefore, business owners will have to keep an eye on costs with rising inflation having an impact on the business multiplier.
Vinku Shah is a manager of the pharmacy team at Silver Levene LLP