Business rates - how much effect does rent have?

emv

We own a building that we will rent to a business that we own. It hasn't been subject to rates so far & falls across a few ratings categories so will be potentially complicated to evaluate. We're working on a business plan at the moment, looking to charge £5,000pa in rent (building purchase price was £100,000). We'd also looked to charge a management fee (for our input as business Directors) but on looking into the VAT regulations, this may not be a good option as we're a non-profit company and can claim VAT exemption on our training as long as there is no management fee paid out by the company. So an alternative would be to charge more rent, perhaps £10,000pa but could this potentially affect business rates calculations? Presumably the relationship between rates & rent is less clear in an owner occupied building anyway (where as owners we could set an artificially low rent to reduce the rates liability?) I know I can get advice from RICS, planning my half hour free call to them, just interested in informal views.

Em

lincroft1710

The current Rating List which came into force on 1 Apr 2010 is based on levels of rents as at 1 Apr 2008. Your property will be looked at in comparison with others in the area of a similar, type, size and usage.

As your proposed rent is between connected parties, it would be deemed "not at arm's length" and ignored as not being an open market rent.

It would be sensible to charge the going rate for the rent.

emv

Thanks, Lincroft, that makes sense re connected parties. Slight problem is that this is an ex-care home turned outdoor learning centre, there aren't really many equivalents. Rates seem to be calculated on single bed spaces elsewhere plus extra for other space, we're just worried the rateable value will be much more than we'll make in the first few years.