Business rates V council tax

[cassa333]

How come the 27 bed hostel I used to work at payed less in business tax than I pay in council tax?

They paied just under £1000 a year and I pay £1600 for a four bed house.

It just doesn't seem fare!

[factor-fiction]

Business rates are normally much higher. Was it regarded as a charity? Maybe that would have resulted in a discount in business rates .

[buildersmate]

It will be a charity. 98% sure of it. The Village Hall I have involvement with pays in business rates about 5% of what I pay in Council Tax. And it isn't small.

[cassa333]

I don't think it was a charity. It was wholey owned by a doctor who thought he was going to make a killing but failed to realise he had been sold a pup..

The hostel went into liquidation in March this year.

[Buenchico]

The business rates for the property would have been calculated as follows. Firstly you need to know the 'rateable value' for the property. That's an estimate of the annual rent which could have been obtained for the property, if it was available on the open market, on 1st April 2003.

That's then multiplied by the 'standard multiplier' or the 'small business multiplier'. For the current tax year those are 0.414 and 0.407 respectively but they've previously been higher. (Last year the multipliers were 0.485 and 0.481 respectively).

If the hostel was paying around £1000 per year in business rates, that appears to suggest that the Valuation Agency believed that (at 2003 prices) the property could be rented out at little more than £2000 per year.

Well, that's the basic theory, but it ignores the 'Small Business Rates Relief'. If a property has a rateable value of less than £6000 the lower multiplier (above) is used but, far more importantly, the bill is reduced by 50%.

So the Valuation Agency must have decided that (at 2003 prices) the property could have only been worth a bit more than £4000 per year rental.

Chris

[cassa333]

He bought the building for £1m + £600,000 for the business. It had a profit of about £450,000 per y but that was because of different working practices and more reliable income streams.

As soon as the previous owner left it sort of fell to pieces. It took two years and a catastrophic loss of business in the last three months of trading to send it into liquidation. The building can't even sell for £300,000now but thats another story.

I still think businesses shouldn't be paying less in rates than homes though.