Guide to Business Rates Liability for New Rental Premises

Business rates liability can be a complex arena, particularly where business premises are being rented or leased. The terms of the rental agreement should detail exactly who is responsible or liable to pay the business rates, so it is vital that this is agreed on and that all parties know exactly where they stand in terms of liability.

Almost all commercial properties in the UK are required to pay business rates. Sometimes, even people who work from home may be required to pay. The short video attachment looks at business rate liability for home workers.

Rental agreements for premises for a new business should be signed in the name of the limited company, rather than the individual, to ensure responsibility lies with the company and not the individual.

Often, it’s best to seek professional advice. RVA Surveyors is a specialist business rates company based in the UK, working to help those who are liable for business rates to discover if there are any ways their liability can be reduced.

Limited Liability

A rental agreement for a limited company needs to be signed using the company name and all correspondence should be addressed to the company regarding the lease or rental. Preferably, there should not be guarantors acting individually within the lease agreement, as they could become personally liable for huge bills should the new business end up not succeeding.

The main point of establishing a limited company is to reduce the liability of the individual, a point which becomes moot if the rental agreement states that the individual rather than the company is the one liable. Landlords may try to convince new businesses to sign rental agreements personally, but as a limited company this is not in the best interests of the owner.

A limited company’s limited liability ends with the company, so there is no point going through the process of establishing a limited company if the rental agreement is then signed by an individual, whether they’re the business owner or a guarantor.

Experts advise that if a landlord is insisting that the lease is signed in the name of an individual, the leaser may find it is in their best interests to look for other premises. More information on business rates and how they are calculated can be found in the attached PDF.

Business Failure

In cases where a new business fails but was established as a limited company and all documentation relating to the rental agreement was addressed to and signed by the company, then the individuals involved do not have to worry too much. The business can be closed down and all correspondence will still go to the business address, not the individual. This is also true for any future bailiff visits. The former owner or owners can produce evidence in the form of a closed business bank account and the lease, signed in the name of the company, to the council or bailiffs.

Named Correspondence

It has been known for councils to personally address correspondence regarding business rates to individual directors of the company. If this happens, they could then update their records, and without their knowledge the director becomes responsible for the business rates. If a director receives correspondence regarding business rates addressed to them personally they should, therefore, immediately bring the mistake to the attention of the council and rectify it by sending a copy of the lease to the relevant council, signed only in the name of the company.