What are business rates?
Business rates are one of many expenditures for businesses. They are charged to every business, large or small, which occupies or uses a non-domestic property for their work.
Like council tax for residential properties, business rates are a legal requirement and must be paid to the relevant local council. The money from business rates goes towards funding for various council services.
Some exemptions to business rates include farm buildings & land, fish farms, places of religious worship and buildings that are used for training/welfare of disabled people. There are also relief schemes that may be applicable to individual businesses which are always worth looking into.
For some businesses, particularly smaller ones, paying their business rates can be a cause of cashflow problems. In some cases, it can be the ‘final straw’ which forces their business into liquidation – either via a compulsory liquidation or a Creditors’ Voluntary Liquidation (CVL).
As a result of the problems that business rates are causing for small businesses, there have been calls for a reform of the process. In the meantime, current business rates continue to be enforced by law. Businesses usually receive their business rates in February / March time for the following tax year. As a business owner, you can also go online to get an estimate of your business rate before you receive any paperwork.
What to do if you’re struggling to pay
If you are struggling to pay your business rates, it is important that you contact your local council as soon as possible to discuss what options are available to you. Business rates are usually expected to be paid in 10-monthly instalments (like council tax). If you miss a payment, the councils are obligated to chase the outstanding debt.
This process usually starts with a reminder notice detailing a seven-day period in which to pay the money owed. If the debt isn’t settled after the reminder notice, the council can summon you to court. Failure to pay before your court date can give the council permission to apply for a liability order. This liability order grants them power to recoup the money via other methods, including appointing bailiffs.
This can all result in the company owing additional money on top of the original debt, often causing the cashflow problems to spiral out of control.
How to deal with business cashflow problems
If your business is struggling with cashflow problems, there are a number of options available to you.
As soon as possible, you should speak to your Accountant for their advice. (If you don’t have an Accountant, or don’t want to consult them for some reason, just give us a call on 0161 907 4044 and we’ll be able to advise you.)
Your Accountant will be able to give you advice on ways to deal with your company’s cashflow problems. If they feel that specialist advice is needed, they will recommend that you speak to an Insolvency Practitioner (like Clarke Bell).
Advice from an Insolvency Practitioner
There are a number of different options available to a business with cashflow problems.
If you don’t want to liquidate your business, a Company Voluntary Arrangement (CVA) could be the best option as a CVA allows you to continue trading whilst your debt is managed. CVAs are only viable if it is determined that your struggling business could become profitable again. An agreement is drawn up which allows the business to pay off their debts (a proportion of which can often be written off) over an agreed period of time – typically 5 years.
In some situations, the best option is for the business to be liquidated. For a business owner to take control of their situation, at the same time acknowledging their legal duties as a director to their creditors, a Creditors’ Voluntary Liquidation (CVL) is often the best solution.
A good Insolvency Practitioner will offer you free initial advice to enable you to discuss your situation and hear the best option(s) available for you.
For more information
For your free advice from Clarke Bell, call 0161 907 4044 or email [email protected]