Diversification – know your business rates liability

In most instances, land and buildings used for agricultural purposes enjoy an exemption from paying business rates; however, this position can change where diversification takes place. Have you considered what the impacts of diversification can have on your business rate position?

Some of the common forms of diversification we see include farm cottages being used for furnished holiday letting (FHL), renewables such as land being used for solar plants, biomass boilers or anaerobic digesters, and disused farm buildings and grassland becoming a livery enterprise.

Furnished Holiday Letting

Within the current system, owners pay council tax on their properties unless the property is let, or available to let, as holiday accommodation for more than 140 days per year. If this is the case, the Government can allow the property to register for business rates as opposed to council tax. Where the rateable value (RV) of the property is £12,000 or less, a claim for small business rate relief can be made, giving complete exemption from business rates. The Government has concerns that the current system is open to abuse and, in November 2018, announced a consultation to seek views on whether the current criteria should be strengthened to deter an exploitation of the relief by second-home property owners who are not running legitimate holiday let businesses.

Renewables

There are currently some limited exemptions applied to agriculture, where the generation is used on site, or constitutes micro generation (less than 50 kw). For other installations, business rates are charged based on the RV. The RV was last revalued from April 2017 based on market and cost evidence as at 1 April 2015.

Equestrian

Most equestrian businesses, including livery businesses, are not considered agricultural activities and, therefore, do not qualify for the agricultural business rate exemption. In establishing the area liable to business rates, it is necessary to establish the purpose for which the land is occupied. Grazing land (used only for grazing) occupied by horses will be exempt from rating, but the stables, ménages, feed and storage areas have no exemptions. A relief known as stud relief is available for premises used for the breeding and rearing of horses (stud farms).

If you find yourself in the position of having a potential business rate liability, you may be able to claim small business rate relief. The relief covers property where the RV is less than £15,000 and your business uses only one premises. If the RV is below £12,000, no rates are payable.