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Business rates: What to do if you can’t afford to pay them

Any business which owns or rents all or part of a property which is used for any non-domestic purpose is legally obliged to pay business rates for that property. The amount you have to pay depends entirely on the rateable value of the property which is determined by the annual market value of the property which you own or rent.

Recently business rates rose after seven years at the same rate but the new rental value will be determined as the value a property was back in 2015 when for many property values were higher than they are now. As a result, there has been much outcry from businesses and experts who think these new rates are unfair and unaffordable as consumer spending falls and inflation rises.

Some businesses have found themselves in the position where their rates have risen by anything up to 300% which many argue is unrealistic based on current property prices. This has tested the budgets of many businesses, particularly small businesses, who are struggling to meet these increased costs in a particularly difficult market.

What are the options available if I can’t afford to pay my business rates?

There are a number of options available when you can’t afford to pay your business rates including:

  • Arranging a payment plan – Get in contact with your local council and explain your situation to them. You may be able to arrange a payment plan which can help you spread the cost of payments by offering longer repayment terms and smaller repayment amounts.
  • Applying for business rates relief – You may be able to apply for business rates relief from your local council which will help you to reduce your business rates bill. You may automatically be given business rates relief but you may also need to apply.
  • Seeking insolvency advice – If you are really struggling to afford to pay your business rates, especially if other liabilities are building up too, then contact us. Whether you have failed a payment plan, received a summons or had to deal with bailiffs, we can help you to deal with your debts and make a plan for the future of your business.

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What happens if I don’t pay my business rates?

Councils across England and Wales take a similar approach when dealing with businesses who have not paid their business rates. They are likely to:

  1. Send you a reminder letter – If you are late with your payments, your local council will send you a reminder letter which will give you seven days to pay the arrears. If you don’t pay in this time, then you may lose your right to pay your business rates in instalments and they are likely to ask for the full amount immediately.
  2. Issue a summons – The summons will inform you that the council intend to apply for a liability order and there will be a court hearing. Any court fees accumulated for the cost of issuing the summons will be added to the amount already outstanding.
  3. Apply for a liability order – If you do not pay your debt before the hearing date then the council can apply for a liability order which gives the council more powers to collect the money you owe.
  4. Instruct a bailiff – A bailiff will be instructed to collect the debt on the council’s behalf and their fees will be added onto the debt you owe. If the bailiff is unable to collect the debt then the council may look to wind up your company or make you bankrupt if you are a sole trader.

I can’t afford to pay, what insolvency options are available for my business?

If you cannot keep up with your payment plan or you are seriously struggling with debt, get in touch with us as soon as possible. We can help you to deal with your current financial situation by looking into business turnaround or business closure options.

  • Company Voluntary Arrangement (CVA) / Individual Voluntary Arrangement (IVA) – If you are struggling with debt but your core business is profitable, you may benefit from a business turnaround option such as this. Voluntary Arrangements are available to limited companies (CVA), sole traders (IVA) and partnerships (PVA). These are legally-binding arrangements with your unsecured creditors where you pay off one affordable amount monthly which is distributed amongst your creditors. CVAs, PVAs and IVAs allow your business to carry on trading whilst protecting you from further creditor pressure and action.
  • Administration – if you operate your business through a limited company, a powerful procedure to protect the business from creditor pressure is Administration. This gives breathing space to appraise the underlying business and formulate a survival strategy.
  • Creditors Voluntary Liquidation (CVL) – If you do not see a future for your company, then the best option for you may be to liquidate via a CVL. This will close down your company, remove the responsibility for the company and its debts from yourself and distribute any monies from the company to creditors.

If you are struggling with your business rates or you are struggling with any kind of business debt, get in touch with us on 0800 901 2475 for information, advice and a plan for your business going forward.

For more information regarding business rates and how they work, visit the Gov.uk website.

Authored by Phil Meekin

Phil Meekin

Head of Marketing