What Happens if I Cannot Afford Business Rates?

If you cannot afford to pay your business rates, there are several potential consequences and the situation can escalate quickly:

  1. A reminder letter will be sent to the business by the local authority.
  2. If still unpaid, a summons will be issued, and costs will start to mount up.
  3. A liability order may then be lodged with the court, allowing the council to take enforcement action, such as instructing bailiffs.
  4. Bailiffs or enforcement agents can be instructed to recover the outstanding balance by seizing and selling your business assets.
  5. Ultimately, if the debt remains unpaid, the council or other creditors could start insolvency proceedings against the company such as a winding up petition.
  6. Failure to pay can also negatively impact your business credit rating, making it harder to obtain credit or loans in the future.

If you are having trouble paying your business rates, it’s crucial to communicate with the local authority promptly. If you feel the situation is indicative of a broader business debt issue, please contact one of our insolvency experts for a free consultation.

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) Contact your local council immediately. They might be able to help by setting up a payment plan or lowering your rates.

(2) See if you can get business rate relief. Depending on your business type and situation, different kinds of relief may be available. The government’s website has this information here.

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

(4) Other options to think about:

  • Think about getting a business loan or other funding if you’re short on cash.
  • If your business is 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?

Most councils are willing to negotiate payment arrangements, as they would prefer to receive the money owed rather than having to pursue costly enforcement action.

The first step in this process is to contact the business rates department of your local council as early as possible, ideally before any payments are missed. The council will likely inquire about your business’s income, expenditures, and any measures you have already attempted to resolve your financial difficulties.

If approved, you will be asked to pay what you can upfront as a lump sum, with the remaining balance divided into affordable installments over a set period of time (e.g. 6-12 months).

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.
  • Debt advice charities: Organizations like National Debtline (0808 808 4000) and StepChange (0800 138 1111) offer free, confidential debt advice services for businesses and can help you understand your options.
  • Contact the team here at Company Debt for experienced and confidential debt advice. Our insolvency practitioners 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 contact us immediately or seek 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 a 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.

Which Insolvency Procedures Could Help if You Can’t Afford to Pay 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.