What if I can’t afford to pay my business rates?
If you can’t afford to pay your business rates, the council responsible can take action to recover the amount that your business owes. If you can’t afford to pay your business rates, there are options available to deal with this type of insolvency.
What happens if I can’t pay my business rates?
Any business which owns or rents all or part of a property used for any non-domestic purpose legally has to pay business rates for that property. The amount you have to pay depends entirely on the rateable value of the property, determined by the property’s annual market value.
Councils across England and Wales take a similar approach when dealing with businesses that don’t pay their business rates. They are likely to:
- Send you a reminder letter – If you are late in paying your business rates, your local council will send you a reminder letter, which will give you seven days to pay. If you don’t pay within this time, then the council may ask for the full amount immediately.
- Issue a Summons – The summons will inform you that the council intends 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.
- Apply for a Liability Order – If you do not pay your debt before the hearing date, the council can apply for a liability order, giving them more powers to collect the money you owe.
- Instruct a debt collector or a High Court Enforcement Officer (bailiff) – The council can instruct a debt collector or a High Court Enforcement Officer to collect the debt on the council’s behalf, with their fees added to the debt owed. If they cannot collect the debt, the council may look to wind up your company or make you bankrupt if you are a sole trader.
More information about bailiffs and their powers
What are my options available if I can’t afford to pay my business rates?
Taking action before you reach the point where you can’t afford to pay your business rates is paramount. There are several options available to you if you become aware that you can’t afford to pay your business rates.
These could include:
- Arranging a payment plan with the council
Speak with your local council and explain your situation to them. You may be able to arrange a payment plan that offers longer repayment terms and smaller repayment amounts, helping you spread the cost of payments. - Applying for business rates relief
You may be able to apply for business rates relief from your local council, which will help reduce your business rates bill. You may automatically be given business rates relief, but you may also need to apply.
What formal insolvency solutions are available?
If you can’t afford to pay your business rates and the above solutions are not suitable, speak to a licensed insolvency practitioner. Whether you have failed a payment plan, received a summons or had to deal with bailiffs, we can analyse the business’ situation and help propose a way forward. Our insolvency practitioners can give actionable advice on how to move forward.
Your business’ situation will dictate which of the following solutions are best for it going forward:
- Repay through a formal repayment arrangement
Company Voluntary Arrangements (CVAs) allow companies to repay their unsecured debts in instalments tailored to what the company can afford on a monthly basis. CVAs typically last five years, pausing creditor pressure and allowing the company to continue trading for the arrangement’s duration. Once the arrangement concludes, any remaining unsecured debt is written off.
More on Company Voluntary Arrangements - Restructure a company through administration
If a company requires more substantial restructuring action, directors can explore administration. During this process, we can act as the administrator while trying to return the company to a profitable state and make it more appealing to potential buyers. Administration is a temporary state wherein the company is protected from creditor pressure and legal action and is often followed by other insolvency processes.
More on Administration - Closing the company through liquidation
If a business is insolvent and can’t recover, a director can choose to voluntarily close the company by placing it into Creditors Voluntary Liquidation (CVL). During this process, assets are realised and distributed amongst outstanding creditors. Any outstanding unsecured liabilities are discharged in the liquidation, and the company ceases to exist, allowing its directors to start afresh.
More on Creditors Voluntary Liquidation
How we can help
Unaffordable business rates could indicate that your company is financially unstable. Speak to us if you can’t afford to pay your business rates. Our advisers can assess your company’s situation and explain the options available. Depending on your circumstances and how you’d like to proceed, we can explain alternative solutions, and provide free, actionable guidance and advice.
- Speak with our initial advisers via phone or online chat. If we can help, we will arrange a free consultation with one of our consultants to discuss your situation in more depth.
- During the consultation, we will advise which solution is the most appropriate route forward for your business.
- After your consultation, if there is an appropriate route forward, we will issue the relevant documentation for you to formally engage us.
In summary
Business rates are a legal obligation for any property owned or rented for anything other than domestic purposes. If you occupy a property to run your business, you need to pay business rates. If you can’t afford to pay your business rates, you can deal with it in several ways if you act quickly enough.
You might be able to contact the council to arrange a payment plan or apply for business relief. Otherwise, contact a licensed insolvency practitioner to assess the business’ circumstances and implement a rescue plan or close the company down. Failing to take action means the council can act to reclaim the debt themselves using bailiffs.
Case Studies
M J Squire Limited
Kelly Burton • Construction & Engineering • Creditors Voluntary Liquidation (CVL)
A bespoke joiners and shop fitters in Sheffield, M J Squire Limited, had been in its trade for more than 30 years.
However, recently it has been forced to close due to the downturn in the construction and retail industry.
The company was located at Orgeave Close in Sheffield, after working for many household names over the years including House of Fraser, Levi’s, Austin Reed and Tommy Hilfiger.
Until 2014, it had been a profitable company but over the past couple of years, it had been unable to secure profitable contracts.
February 10th, 2016 saw the appointment of Wilson Field’s Andy Wood and Robert Dymond as liquidators. This development for the company came as a result of suffering cash flow problems.
Operations at M J Squire Limited have now ceased and regrettably, all nine roles within the company were made redundant.
Andy Wood, insolvency practitioner from Wilson Field, spoke about his work on this case.
“Declining sales at M J Squires significantly impacted cash flow and the business’ ability to meet its liabilities. In the face of tough market conditions, the director has taken the difficult decision not to continue trading. The business has closed and the assets are being sold.”
“It is very sad to see this well-known local business cease to trade after over 30 years. The downturn in the retail sector has hit this business hard.”
Derwent Castings Limited
Kelly Burton • Metals • Creditors Voluntary Liquidation (CVL)
Unsecured creditors owed money by a Derbyshire manufacturing company which went into liquidation are to receive a higher than the expected dividend of 60p in the pound.
A total in excess of £128,000 is due to be distributed to unsecured creditors of Whatstandwell-based Derwent Castings Limited, whose claims totalled over £192,000.
The company, whose roots date back to the 1940s, had traded profitably for a number of years but in late 2013 / early 2014 saw the cancellation of its largest sales contract which represented 70 per cent of its turnover.
Bosses at the company, which employed 16 staff including three directors, struggled to attract replacement business and had to drop prices. Further business was lost as a result of foreign competition.
Sheffield’s insolvency specialist Wilson Field was called in as liquidator and worked with the creditors’ committee of Derwent Castings Limited to secure the positive dividend.
Andy Wood, associate director and insolvency practitioner at Wilson Field said:
“Dividends for insolvent companies are generally low, or nothing, for a variety of reasons – cost of staff redundancies, difficulty collecting outstanding invoices, selling assets in a forced sale situation, selling specialist assets which have limited appeal to purchasers, deteriorating or perishable assets, as well as other costs involved.
“However, thanks to a very positive relationship with the creditors committee, I am delighted to return a healthy dividend to the unsecured creditors in the region of 60p in the pound.
“The supply chain is often greatly affected by a liquidation and in this case we have been able to help creditors.”
Derwent Castings Limited was incorporated in August 2002 and specialised in iron casting from the five-acre Derwent Foundry site at Whatstandwell near Matlock.
However, the iron founding operation at Derwent Foundry was first introduced back in 1946 by Wragg & Hawksley which produced cast iron pipes for the water industry.
In 1950 the foundry was acquired by WH Davis & Sons Ltd to supply castings for their railway wagon building business. Following a management buy out in 1984, the company was renamed Derwent Foundry Ltd and following its closure in July 2002, was bought by its present owners and renamed Derwent Castings Ltd.
Amongst jobs carried out on site were moulding using loose pattern and modern air setting (boxless) sand systems; metals work using the latest in electric induction melting producing a wide range of grey, SG and alloy irons; an independent Namas approved test laboratory, finishing, pattern making and machining facilities.
Statestrong Limited
Kelly Burton • Manufacturing • Administration, Creditors Voluntary Liquidation (CVL)
Insolvency experts Wilson Field has helped turnaround the fortunes of a loss-making manufacturing company in Lancashire providing a new future for its 80 employees.
Businessman Russell Blaikie acquired the struggling 40-year-old Statestrong Limited, headquartered in Lytham St Annes, through a pre-pack sale and has been able to help the company immediately utilising his expertise in manufacturing and management.
Arrangements for the purchase of Statestrong’s business and assets were negotiated by Sheffield business specialists Wilson Field who affected the sale shortly after being appointed.
The company, which manufactures and supplies aerosol and liquid products for use in health and beauty, household, automotive and industry globally, posted sales of £12m last financial year, but had suffered pressure from creditors with outstanding arrears.
The total value of the deal is undisclosed but includes the business and the assets of the company based on Boundary Road in Lytham St Annes and Tarporley in Cheshire, which will now trade as Statestrong Products Limited.
Mr Blaikie said:
“Transactions of this nature are sensitive and require careful handling. The team at Wilson Field provided exactly the right professional approach.”
Wilson Field’s insolvency practitioners Kelly Burton and Joanne Wright worked closely with Mr Blaikie along with senior corporate case administrator Gareth Kinneavy.
Kelly Burton, said:
“The company had a wealth of expertise but was straddled with financial liabilities which ultimately made its future questionable. Looking forward, a previously distressed business now has a viable future.”
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