Here come the Business Rates!

Business rates are often cited by retailers as one of their biggest costs and as one of the barriers that makes town centre retailing difficult to compete with online retail.

How are business rates decided?
For shops, business rates are calculated by multiplying the rateable value of the property by a multiplier.  The rateable value is the open market rental value of the property is assessed by an independent surveyor.  The multiplier is set by Central Government.  In England the standard rate is 43.3p and 42.6p for small businesses.  So a property with a rateable value of £30,000 would have to pay £12,990 per year.  The small business rate is explained more here.  Charities and other organisations may have to pay.

Business Rates v Turnover
Business rates for pubs are charged based on turnover, but not for other businesses.

In Bradford, the Tesco Extra store has a rateable value of £1.96m and will therefore pay about £848,680 in rates.  Assuming the benchmark turnover for the store is £13,405 per sq m (like for this example), and two thirds of the store is for sales,  the turnover is approximately  £77.5m overall.

A small independent retailer could expect a sales density of about £2,500 per sq m.  One of the vacant units on Market Street has a rateable value of £24,250, so business rates would be approx £10,500.  They could expect to turnover about £190,000.

Business rates for the large superstore represent just over 1% of turnover and for the small independent retailer represent just over 12% of turnover.  Of course these are just based on assumptions, but they do give some indication of the challenges smaller retailers face.




Are business rates charged on empty shops?
Since 2008 they do, but there are exceptions for listed buildings and shops that are empty in the first three months.

Are there any business rate relief schemes?
Business rate relief will be given to firms in Bradford who train up employees as part of the Regional Growth Fund initiative.


Do the Government have any plans for Business Rate reform?
There are some woolly words in the Portas Review, but nothing more than that.