Business rates are statutory property tax levied by local councils on commercial premises. They will be charged if even part of a building is used for non-domestic purposes.

Forty percent of the money collected is retained by the Council, with the remainder going to HMRC.

This article will explore the implications of not paying your business rates, as well as your options as a company director.

Business Rates

What to do when you can’t afford to pay your business rates

If you’re having trouble paying your business rates, it’s important to act quickly. Here’s what you can do:

(1) Talk to your local council right away. They might be able to help by setting up a payment plan or lowering your rates.

(2) See if you can get business rates relief. There are different kinds of relief based on your business type and situation. You can find this information on the government’s website.

(3) It’s also a good idea to get advice from a professional like an accountant or insolvency practitioner. We can look at your finances and suggest the best steps for you.

Other options to think about:

  • Think about getting a business loan or other funding if you’re short on cash.
  • If your business is basically sound, but cash flow is a problem, a Company Voluntary Arrangement (CVA) might be appropriate. This is a formal way to make structured repayments to the people you owe money to, for a percentage of the debt.
  • If things are really bad and your business can’t keep going, you might have to think about Creditors’ Voluntary Liquidation (CVL). This means closing down your business and selling its assets to pay off debts. This is usually the last option, but sometimes it’s the best way to go.

What Happens if You Fail to Pay Business Rates?

If you don’t pay your business rates, expect to receive an initial automated reminder.

If you don’t respond to that, the course of action taken may vary slightly from council to council, but the common practice is for them to then ask you to pay the entire year’s rates immediately, as opposed to allowing you to continue via monthly instalments.

You will then likely receive one or two more reminders before the council starts legal proceedings against you.

A standard process of escalation would be as follows:

  • Reminder
  • Second Reminder
  • Final Notice
  • Court Summons
  • Liability Order  (court order to pay what you owe)
  • High court enforcement officers (bailiffs)
  • Insolvency proceedings against your company

Who is Responsible for Paying Business Rates?

It is the occupier of the premises who is responsible for paying rates, not the owner. Of course, the owner may negotiate a rent which includes business rates but unless this has been clearly agreed, it is the occupier.

If this occupier is a limited company then the responsibility will lie with directors to ensure rates are paid.

If it’s a sole trader then the responsibility lies with the individual.

We Can’t Afford to Pay Our Business Rates – Is there any Help Available?

If you can’t afford tp pay business rates you should contact a licensed insolvency practitioner immediately. We have experts available right now, and our consultations are free and confidential.

You should also try negotiating with your council, who may consider a payment plan.

Small Business Rates Relief Scheme (SBRR)

The government grants certain businesses discounts or exemption from business rates. Visit their site to learn the full criteria and eligibility here.

Examples of businesses who do qualify for SBRR:

  • Business occupying one property with a rateable value of less than £12,000 you will get 100% relief.
  • Businesses with a rateable value of between 12000-15000 will get a reduction on a sliding scale. (eg, if your rates are £13,500 you will get a 50% reduction)
  • If your business is in a rural area
  • If your business is operating within an enterprise zone
  • Charities and community sports clubs are eligible for charitable relief.

What if You’ve Received a Business Rates Liability Order from Your Local Council?

Receiving a liability order is a serious matter and, if you’re the director of a limited company, you should make contact with us immediately, or take other professional advice.

If you’ve already received the order, you should be aware that your costs are now increasing as the court has the power to make you liable for any costs incurred by the council.

If the court date has not yet happened there may yet be time to approach the council with request for a payment plan. They may well be open to this since it’s a more likely way for them to get paid than push you into insolvency.

Can You Stop Enforcement Action by Bailiffs for Business Rates?

If the liability order has been issued, you should expect to hear from some high court enforcement officers who will have been instructed to collect the debt. Read our article here on: What Can Bailiffs take from a Business?

In short:

  • Bailiffs have a legal duty to notify you before turning up
  • Once they’ve arrived on your business premises, they can only take those assets which legally belong to the limited company
  • Make sure they show you their official ID documents
  • Since High Court bailiffs come with a legally binding mandate, you cannot prevent the enforcement action.