Small business rates relief and aggregation

Jeremy535897

I have been asked by friends whether the council has any powers to aggregate entities for the purpose of applying the SBRR. The situation is as follows:
Business 1 is a pub with letting rooms owned by husband and wife.
Business 2 is a pod site on an adjacent plot of land, owned by husband and wife, but let to a company they own (the structure was a condition of obtaining a grant, but the time limit for clawing that back has ended).
The businesses are run completely separately with separate bank accounts, books etc.
The owners, looking to cut costs, are considering whether the pod site can be operated as a sole trade by the wife, instead of by the company. The company assets are modest and there are no issues winding it up.
At present both the pub and the pod site qualify for SBRR independently of each other. The question is whether this would continue to be the case if the wife took over running the pod site from the company. The amounts involved, if aggregated, would exceed the SBRR valuation limit.

Bookworm105

@lincroft1710 ??

lincroft1710

It will be VOA who will decide if there still should be 2 Rating Assessments, rather than the council.


If the 2 premises are occupied by different entities, then they should have separate Rating Assessments (which they correctly currently do) and I think that the wife as sole trader would still be considered a different entity from the husband and wife partnership running the pub.


The VOA would only consider merging the assessments if asked to by the council, but I cannot see them agreeing to such a request, given the  circumstances

Jeremy535897

lincroft1710 said:

It will be VOA who will decide if there still should be 2 Rating Assessments, rather than the council.


If the 2 premises are occupied by different entities, then they should have separate Rating Assessments (which they correctly currently do) and I think that the wife as sole trader would still be considered a different entity from the husband and wife partnership running the pub.


The VOA would only consider merging the assessments if asked to by the council, but I cannot see them agreeing to such a request, given the  circumstances

Thanks very much. On doing a bit of research, I came across this:
Q. What if a ratepayer has two separate businesses?  Is SBRR available?
 It depends on the circumstances of the particular case.  Only a legal person (individual or body) can be liable for rates.  Under section 43 of the Local Government Finance Act 1988, the ratepayer is the legal person in occupation of the hereditament.  So where a company occupies a hereditament, it is the company which is the legal person liable for rates.  Where a partnership occupies a hereditament, usually the individual partners will be jointly and severally liable for rates.  Where an individual occupies a hereditament then that individual is the person liable to pay rates.  Where a number of individuals jointly occupy a hereditament, they will be jointly and severally liable for rates. Where a partner or joint occupier also occupies another property, then for SBRR purposes, account must also be taken of all the properties s/he occupies including those s/he occupies as a partner.  This is because partnerships are not usually separate legal persons.  In partnerships, all the partners - not the partnership itself - would be considered to be occupiers of the hereditament. Companies are different from partnerships.  ABC Limited would be a separate legal entity.  If the company occupies the hereditament, it would be liable for the rates.
https://www.sutton.gov.uk/documents/20124/209237/SmallBusinessRateReliefInDetail.pdf/34c3543d-fc5c-7660-1588-6a7f02d0549a

lincroft1710

I was looking at it from a Rating Assessment POV rather than SBRR. It seems the couple should keep the status quo, otherwise they could lose the SBRR. If the couple operated both businesses together and the VOA decided to merge, I have no idea if the merged assessment would be less than the existing 2 added together.

Jeremy535897

Thanks for your help. The business premises are adjacent, so I doubt a merged assessment would be lower. I agree with you that it seems safest to keep the company as it is.

lincroft1710

It's a very, very long time ago that I dealt with "entities" regarding Rating (prob 25/30 yrs), and I may be mistaken or rules have changed, but I seem to remember that someone in a partnership and also a sole trader were separate entities, so it may be worth checking another council's website. Councils do not always get it right

Jeremy535897

lincroft1710 said:

It's a very, very long time ago that I dealt with "entities" regarding Rating (prob 25/30 yrs), and I may be mistaken or rules have changed, but I seem to remember that someone in a partnership and also a sole trader were separate entities, so it may be worth checking another council's website. Councils do not always get it right

On planning law, I have had to point out to councils where they have failed to read the legislation, so I take your point.
I remember that councils produced Q&A factsheets like the one I quoted, and it came from central giovernment. The wording used in a publication by Square is largely the same:

"Can I claim small business rate relief for two businesses?

Only a single individual or company can be eligible for rate relief. Under section 43 of the Local Government Finance Act 1988, the ratepayer is the person occupying the property. So in the case that a company occupies a property, the company is considered the legal entity liable for rates.

If a partnership occupies a property, the partners share responsibility for rates and therefore share rate relief. If a partner also occupies another property, the other property must also be taken into account when applying for small business rate relief as partnerships are not usually separate legal persons."

Sutton says:

"It depends on the circumstances of the particular case. Only a legal person (individual or body) can be liable for rates. Under section 43 of the Local Government Finance Act 1988, the ratepayer is the legal person in occupation of the hereditament. So where a company occupies a hereditament, it is the company which is the legal person liable for rates. Where a partnership occupies a hereditament, usually the individual partners will be jointly and severally liable for rates. Where an individual occupies a hereditament then that individual is the person liable to pay rates. Where a number of individuals jointly occupy a hereditament, they will be jointly and severally liable for rates.

Where a partner or joint occupier also occupies another property, then for SBRR purposes, account must also be taken of all the properties s/he occupies including those s/he occupies as a partner. This is because partnerships are not usually separate legal persons. In partnerships, all the partners - not the partnership itself - would be considered to be occupiers of the hereditament."

The law is here:The Non-Domestic Rating (Small Business Rate Relief) (England) Regulations 2023, which says in para 2:

2.—(1) For the purposes of paragraph 4(2)(a) of Schedule 4ZA to the Act (occupied hereditaments: chargeable amount), the conditions to be satisfied are that on the chargeable day concerned—

(a)A, in relation to the hereditament, is not more than £15,000, and

(b)the ratepayer occupies only one hereditament in England.

The question therefore is whether a partner in a partnership occupying premises A is the same "ratepayer" as the same individual occupying premises B as a sole trade. It is true that the individual partners, not the partnership, own the partnership property, under English law, but that is not the relevant question.

Section 50 of the Local Government Finance Act 1988 refers to making separate provisions for joint occupiers, and there is reference to them in The Non-Domestic Rating (Collection and Enforcement) (Miscellaneous Provisions) Regulations 1990, which talk about partners being jointly and severally liable. I am not wholly convinced, but I think it is best to assume that it is unsafe to risk having a partner in occupation of both properties.