Can't pay business rates? A Worried Director's Guide

Now that the business rates relief of 75% for hospitality, retail and leisure has ended in 2025 and reverted back to 40%, is this putting pressure on your business? If you can’t pay your business rates, it may be because you need to get extra reliefs from your local council or even challenge the amount that you have to pay. As such, it is worth understanding what they are and how they are calculated.

Understanding Business Rates

Business rates are taxes charged on most non-domestic properties, so for commercial purposes rather than residential i.e., shops, pubs, factories, holiday rental homes. Business rates are set as a percentage of a predicted rent that the premises could be worth in the open market, if it was rented out on a yearly basis. This is variable and based on the assessment of each business, comprising multiple factors. This explains why properties located in more desirable places i.e. a busy high street, attract higher business rates.

So, if the rateable value of the property is £50,000 per year you will pay 47.9% of this value (the multiplier) in taxes. Your local council will issue a business rates bill each year for the following tax year.

Can my business rate value be challenged?

It is possible to challenge your rateable value if it is incorrect. However, this is only advisable if the actual property has changed in its layout or has been impacted by other external factors such as infrastructure changes or access. Ultimately, there must be a valid reason to support your appeal. Do make sure to look for the rates of similar properties in the area and compare, bearing in mind the varying factors which can contribute to differences. Be aware that an appeal could result in the rateable value increasing.

What to Do if You are Struggling to Pay

Many retailers and small businesses are facing the prospect that they will not be able to pay their local council, but this does not always need to be the case. You have several options available. First, it should also be noted that there are business rate relief schemes; check if you are eligible as this could work in your favour. For those not meeting the relief scheme criteria, the first thing to do should be to contact your local council. It is never easy to admit the struggle to pay, but it is better to be honest, as landlords will be left with the bill if they do not work something out with you. If you discuss first, some sort of agreement may be settled, outlining a payment plan going forward, in your favour.

Formal Solutions for Unpaid Business Rates

If informal arrangements are not sufficient, you may need to consider more formal options:

• Company Voluntary Arrangement (CVA): A CVA is a formal deal which allows up to 60% of unsecured debt to be written off so you have substantially less to pay back. The local council lists as an unsecured creditor in a CVA, so a proportion of business rate debt can actually be written off.
• Alternative Finance: Alternate sources of finance should be considered since new funding could free up cash flow and allow you to settle some financial commitments.
• Creditors Voluntary Liquidation (CVL): A CVL may be an option you resort to – this is when the company director decides to liquidate the insolvent business.

The Consequences of Not Paying

If you do not pay your business rates, the local councils have the power to implement measures. This involves:

• Reminder letter (giving 7 days to pay)
• Issuing a summons (the council inform you of their intention to apply for a liability order)
• Liability order goes ahead
• Bailiff action can commence
• Insolvency proceedings

Just make sure to communicate with licensed insolvency practitioners like ourselves, before taking any action as we can assist with your best options and help you avoid any unnecessary consequences.