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the business rates in the UK

12 September 2017

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The Supreme Court1 ruled earlier this year that when substantial refurbishment works are being undertaken at a property the building must be given a reduced rateable value for the purpose of calculating business rates. This decision was warmly welcomed by those owning and developing vacant commercial premises and is indeed an excellent opportunity for us to highlight the main principles governing business rates in the UK. 

In England, business rates are charged on most non-domestic properties, e.g. shops, offices, pubs, warehouses, factories. We can draw a parallel between the UK business rates and the French Taxe sur les Bureaux (TSB) applicable to the properties (or parts of them) used as offices, shops, storage and attached parking space in the Ile-de-France region, i.e. Paris and its suburbs2.

Who is liable to pay the tax?

In England, the person liable to pay the business rates is the property ’occupier‘, i.e. the person entitled to possession of the property. In the case of a leased property, this person is the tenant. However, for the avoidance of doubt the lease should always make clear who has liability for rates.

In France, the onus of paying falls on the person who is the legal owner of the property (or the holder of a ‘real right’ on the property, e.g. usufruct) on 1 January of the tax year. In the case of a leased property, this person remains the landlord but provided that such faculty has been expressly provided in the lease, the landlord will be able to charge to the tenant the payment of the tax.

When is the tax due and how is it valuated?

In England (please note the process is different in Scotland), the local council sends a bill every year around February-March for the following tax year. The calculation of the business rates is based on the property’s ‘rateable value’ estimated by the Valuation Office Agency (VOA), and multiplying it by the relevant multiplier set up by the Government. This value broadly amounts to the open market rental value that one can obtain for the property. The VAO adjust the value every 5 years to reflect the changes in the property market. The last valuation was in 2017.

In France, no bill is sent to the payer; instead the French Tax Administration relies on a self-declaration that must be made by the payer. The bill must be paid by 1 March of each year. The tax amount is calculated by multiplying the surface area of the property by a value per square metre which fluctuates depending on the location of the property. Each year, the tax rates are reviewed according to the National Cost of Construction Index.

Is there any exemption or relief?

In England certain properties are eligible for discounts from the local council to reduce their bill. Some categories of properties are also fully and statutory exempt from any business rates as a result of the small business relief or rural rate reliefs. As far as vacant properties are concerned, business rates are still payable (subject to exceptions e.g. no rates are payable for the first three months of vacancy). In accordance to the above decision, a non-domestic property which is not capable of being occupied due to redevelopment works undertaken cannot be removed from the rating list, but is entitled to see its rateable value amended during the works so as to reflect the undergoing reconstruction state and to be reduced to a nominal value (in this case to £1.00).

In France, some TSB reliefs also exist, for instance: office properties whose surface area is less than 100 m² are exempted, as well as business properties whose surface is less than 2500 m². However, vacant properties remain taxable. Offices and properties that are rendered incapable of occupation due to works being undertaken at the property are not exempted from taxation, as long as the purpose of such works is not to vary the use of the property3.


1 Newbigin (Valuation Officer) v S J & J Monk (a firm) [2017] UKSC 14

2 Article 231 ter of the French Code General des Impôts

3 (CAA, arrêt du 28 juin 2012, n° 11PA00678; CE, arrêt du 5 mars 2014, n° 362283, ECLI:FR:CESJS:2014:362283.20140305)

If you require any further information, please do not hesitate to contact Dominique Tai on +44 (0)20 7337 1007 or at dominique.tai@brownejacobson.com or Alix Troënès-Smith at +44 (0)20 7871 8541 or alix.troenes-smith@brownejacobson.com. Or visit our French group page for more information.

The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

Alix Troenes

Alix Troënès-Smith

French Group Manager - French and English qualified lawyer

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