If you’re struggling to meet your business rate obligations, be aware that many businesses face similar challenges. The most important thing is to take immediate action.
Your first step should be to contact your local council’s business rates department. Don’t wait until you’ve missed a payment. Reaching out early demonstrates your commitment to fulfilling your obligations and can help prevent further complications.
Here’s what will happen if you don’t address the issue:
The council will send a reminder letter to your business.
If still unpaid, they’ll issue a Summons (an order to attend court), which incurs additional costs of up to £100.
A Liability Order may be lodged, allowing enforcement action. (This adds further costs of £36.90.)
The council might start insolvency proceedings if the debt remains unpaid.
Non-payment can negatively impact your business credit rating.
If you are having trouble paying your business rates, it’s crucial to communicate with the local authority promptly.
If you feel the situation is indicative of a broader business debt issue, please contact one of the insolvency experts at Company Debt for a free consultation.
How to Negotiate Business Rate Payment Plans with Your Council
When you contact your local council about difficulties paying your business rates, you’ll find they often have a range of options available to help you.
The council may offer:
Revised payment schedules: This could involve changing your payment date to better align with your cash flow or spreading payments over a longer period.
Short-term payment holidays: In some cases, the council might agree to a brief pause in payments to allow you to address immediate cash flow issues.
When discussing these options, be prepared to:
Provide recent financial statements or cash flow projections
Explain any temporary factors affecting your ability to pay
Demonstrate how you plan to address the situation long-term
Remember, while councils aim to be accommodating, they’re also obligated to collect rates. Be realistic about what you can afford and commit to any new agreement you reach. Failing to adhere to a negotiated plan could result in the loss of these arrangements and potential enforcement action.
Schemes to Reduce Your Business Rates
The UK government and local councils offer various forms of business rates relief, depending on your circumstances. It’s worth checking to see if you’re eligible for one of these[1]Trusted Source – GOV.UK – Business Rates Relief.
The current Business Rates Relief schemes include:
Relief Scheme
Eligible Businesses
Small Business Rate Relief
Properties with rateable value £15,000 or less
Retail, Hospitality and Leisure Relief
Eligible businesses in these sectors
Rural Rate Relief
Businesses in rural areas (population under 3,000)
Signs of Deeper Financial Trouble: Is It More Than Just Rates?
Whilst struggling with business rates can be a standalone issue, it’s often a symptom of broader financial challenges. If you’re finding it difficult to pay your rates, it’s crucial to assess your overall business health.
Consider the following indicators:
Cash Flow Problems: Are you consistently struggling to meet other financial obligations?
Declining Sales: Has your revenue been steadily decreasing over recent months or years?
Mounting Debts: Are you accumulating debts with suppliers or other creditors?
Overdraft Reliance: Are you constantly at or near your overdraft limit?
Late Payments: Are you regularly paying staff or suppliers late?
Tax Arrears: Do you have outstanding tax liabilities with HMRC?
If you’re experiencing several of these issues, it may indicate that your business is facing more significant financial difficulties. In such cases, addressing business rates alone may not be sufficient.
If you’re concerned about potential insolvency, it may be advisable to consult with one of the insolvency practitioners here at Company Debt for a comprehensive review of your business’s financial position and options.
Who Should I Contact for Advice on Managing Business Rates Debt?
Your Local Council: The first step should be to speak with your local council’s business rates department. They can provide guidance on your specific situation and may offer solutions such as payment plans to help manage your debt.
Debt advice charities: Organizations like National Debtline (0808 808 4000) and StepChange (0800 138 1111) offer free, confidential debt advice services for businesses and can help you understand your options.
Contact the team here at Company Debt for experienced and confidential debt advice. Our insolvency practitioners specialise in providing tailored solutions to businesses facing financial difficulties and can offer expert guidance on managing business rates debt.
What if You’ve Received a Business Rates Liability Order from Your Local Council?
A Business Rates Liability Order is a legal document issued by a magistrates’ court that gives the local council enhanced powers to recover unpaid business rates, including the ability to instruct bailiffs or initiate insolvency proceedings.
Receiving a liability order is a serious matter, and if you’re the director of a limited company, you should contact us immediately or seek other professional advice.
If you’ve already received the order, you should be aware that your costs are now increasing as the court has the power to make you liable for any costs incurred by the council.
If the court date has not yet happened, there may yet be time to approach the council with a request for a payment plan. They may well be open to this since it’s a more likely way for them to get paid than push you into insolvency.
Which Insolvency Procedures Could Help if You Can’t Afford to Pay Business Rates?
If you’re consistently struggling with business rates and other financial obligations, it’s crucial to seek professional help from insolvency experts promptly. Delaying this step could lead to more severe consequences for your business.
Consider consulting an insolvency practitioner if:
You’re unable to pay debts as they fall due
Creditors are threatening legal action
You’re consistently relying on credit for day-to-day expenses
HMRC is pressuring you for unpaid taxes
You’re unsure of your company’s true financial position
A licensed insolvency practitioner can:
Provide an initial consultation to assess your situation
Negotiate with creditors, including HMRC, on your behalf
Investigate financing options like invoice factoring to improve cash flow
Guide you through formal insolvency procedures if necessary
If you are unable to afford your business rates and don’t qualify for an instalment plan, your primary insolvency options include a Company Voluntary Arrangement (CVA), Administration, or Liquidation. Each option has its own process and implications for the future of your business:
Company Voluntary Arrangement (CVA): A CVA is an agreement between your business and its creditors to pay off debts over a fixed period. This arrangement allows you to continue trading while paying a proportion of your debts. CVAs are designed to help businesses recover by restructuring their debts into manageable payments, potentially including business rates arrears.
Administration: This is a process where an appointed administrator takes over the management of your business with the aim of repaying creditors as much as possible. The administrator can make decisions about the future of the business, such as restructuring or selling assets. Administration can provide protection from creditors while a strategy is developed to save the company or maximise returns to creditors, possibly through a sale of the business.
Liquidation: If the business is not viable, liquidation might be the most appropriate solution. This process involves selling all assets and using the proceeds to pay off creditors. After liquidation, the company is dissolved, effectively bringing its operations to an end. Liquidation can be voluntary, initiated by the company’s directors, or compulsory, initiated by creditors.
Each of these solutions has significant implications for your business and should be considered carefully. Consulting with insolvency practitioners like ourselves can provide you with the expertise needed to navigate these complex processes.
Am I Personally Liable for Business Rates?
Generally, as a business owner, you are not personally liable for business rates if your company is a limited company. The limited company itself is responsible for paying the business rates.
However, there are exceptions:
If you’re a sole trader or in a partnership, you are personally liable for business rates.
If you’re leasing a property, check your lease agreement. Some landlords pass the responsibility for business rates onto the tenant.
In cases where a limited company becomes insolvent, directors are not automatically personally liable for unpaid business rates unless misconduct is proven. Directors can be held personally liable if they’ve acted fraudulently or negligently, such as continuing to trade when knowing the company can’t pay its debts.
If you’re unsure about your liability, it’s crucial to seek professional legal advice. Understanding your responsibilities can help you make informed decisions about your business structure and property arrangements.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.
