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 per cent 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.


What options are available if I can’t pay my business rates on time?

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 here.

(3) It’s also a good idea to get advice from a professional like an accountant or insolvency practitioner such as ourselves. Being unable to pay debts when due can be an indicator of insolvency which isn’t something you can navigate alone.

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.

Can I arrange a payment plan for my outstanding business rates?

Yes, you can often arrange a payment plan for your outstanding business rates. If you’re struggling to pay, it’s crucial to take action quickly by contacting your local council. Here’s a step-by-step guide on how to proceed:

  1. Reach out to the business rates department of your local council as soon as you realize you might have difficulty making payments. It’s better to do this before missing a payment.
  2. Be prepared to explain your financial situation in detail. The council may ask about your income, expenditure, and any steps you’ve already taken to try to find the money.
  3. Ask if you can arrange a payment plan that spreads your business rates payments over a longer period. Councils may offer different arrangements depending on your circumstances and policies.
  4. You might be required to provide financial statements or other documentation to support your request.
  5. If the council agrees to a payment plan, make sure you understand the terms, including how much you need to pay each month and the duration of the payment plan.

Local councils are often willing to work with businesses to find a solution that prevents further financial difficulties.

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

Are there any reliefs or grants available to help with business rates?

Yes, there are several reliefs and grants available to assist with business rates. These can significantly reduce the amount you owe or provide short-term financial support.

Available reliefs include:

  • Small Business Rate Relief: For businesses with a property that has a rateable value below a certain threshold, there may be no rates payable.
  • Rural Rate Relief: Businesses in designated rural areas may qualify for 100% relief.
  • Charitable Rate Relief: Charities and amateur community sports clubs can apply for up to 80% relief on business rates.
  • Retail Discount: Retail, hospitality, and leisure businesses may receive a discount on their business rates.
  • Enterprise Zones: Businesses located in an enterprise zone may be eligible for rate relief.

Grants may also be available, particularly in response to specific circumstances such as the COVID-19 pandemic. These grants are typically aimed at supporting businesses that are severely impacted by the crisis.

To access these reliefs and grants, you should contact your local council. They can provide information on eligibility criteria, application processes, and deadlines.

How do I apply for business rates hardship relief?

To apply for hardship relief, businesses should contact their local council directly, prepared to submit detailed information about their financial situation, including recent financial statements and evidence of hardship. The application process aims to thoroughly assess eligibility and determine the level of support that can be responsibly provided, considering the broader impact on the community and local taxpayers.

Local authorities have the discretion to award hardship relief, but before doing so, they must be satisfied that granting the relief will benefit not only the ratepayer but also the wider community. This ensures that the support provided aligns with the interests of all stakeholders.

Hardship relief is usually granted as a percentage of the rates payable for a specific period within the rating year in which the application is made. Interim decisions on relief may be made, subject to review based on the actual financial accounts for the period concerned.

What is the process for appealing against business rates valuation if I can’t afford the current rate?

If you find the current business rates valuation unaffordable, you can appeal against it through the following process:

  1. Check Your Rateable Value: First, review the rateable value assigned to your property on the Valuation Office Agency (VOA) website in England or its equivalent in Scotland, Wales, or Northern Ireland.
  2. Request a Revaluation: If you believe your rateable value is incorrect, you can request a revaluation. Before formally challenging it, you should gather evidence to support your claim, such as property size, usage, or rental value discrepancies.
  3. Make a Formal Appeal: If discussions with the VOA (or its regional counterpart) don’t lead to a satisfactory adjustment, you can formally appeal the valuation. This is done through the Check, Challenge, Appeal process in England or similar procedures in other parts of the UK.
    • Check: Verify the factual details held about your property by the VOA are correct. If there are errors, you can have them corrected during this stage.
    • Challenge: If you still disagree with the rateable value after the check stage, you can challenge it by providing evidence to support your case.
    • Appeal: If your challenge is unsuccessful, you can appeal to an independent valuation tribunal. This step should be taken as a last resort, as it can be time-consuming and may require legal advice.

Who should I contact for advice on managing business rates debt?

  • Your Local Council: The first step should be to speak with your local council’s business rates department. They can provide guidance on your specific situation and may offer solutions such as payment plans to help manage your debt.
  • Business Debtline: This is a free service offering confidential and independent advice on how to deal with debt problems. Business Debtline can help you understand your options and advise on how to proceed.
  • Contact the team here at Company Debt for experienced and confidential debt advice. We specialise in providing tailored solutions to businesses facing financial difficulties and can offer expert guidance on managing business rates debt.

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.

What options are there if I cannot afford to pay my business rates?

If you are unable to afford your business rates, and don’t qualify for an installment plan, your primary options include a Company Voluntary Arrangement (CVA), Administration, or Liquidation. Each option has its own process and implications for the future of your business:

  • Company Voluntary Arrangement (CVA): A CVA is an agreement between your business and its creditors to pay off debts over a fixed period. This arrangement allows you to continue trading while paying a proportion of your debts. CVAs are designed to help businesses recover by restructuring their debts into manageable payments, potentially including business rates arrears.
  • Administration: This is a process where an appointed administrator takes over the management of your business with the aim of repaying creditors as much as possible. The administrator can make decisions about the future of the business, such as restructuring or selling assets. Administration can provide protection from creditors while a strategy is developed to save the company or maximise returns to creditors, possibly through a sale of the business.
  • Liquidation: If the business is not viable, liquidation might be the most appropriate solution. This process involves selling all assets and using the proceeds to pay off creditors. After liquidation, the company is dissolved, effectively bringing its operations to an end. Liquidation can be voluntary, initiated by the company’s directors, or compulsory, initiated by creditors.

Each of these solutions has significant implications for your business and should be considered carefully. Consulting with insolvency practitioners like ourselves can provide you with the expertise needed to navigate these complex processes.