And what can directors do to tackle them?

Additional data arrived this week on the payment levels of business rates which reinforces the idea that while some businesses may seem like they’re serenely sailing along on the surface like a swan, while underneath the waterline everyone is kicking like crazy just to stay afloat. 

Approximately one in ten UK businesses are being sued by their local council for non-payment of business rates. 9.8% of all non-domestic premises received a summons with 190,000 appearing in court in the last financial year. 

This means that roughly 750 shops, pubs and other businesses are appearing in front of magistrates every day. 

The situation could get worse before it improves over the coming year as the standard business rate on all properties with a rateable value of £51,000 or higher rose by 2.4% to 50.4p. This is offset for a third of UK companies that don’t pay rates because of small business rate relief. 

This adds to the genuinely straitened trading circumstances facing businesses with the triple threat of rising business rates, increasing rents and reduced physical sales in the face of rising internet competition – which is both rent and rates free. 

By March this year, more than 25% of businesses in Richmond and Wandsworth council areas appeared before magistrates. Islington borough was also badly affected with 23.3% while every major urban area in the country continued to see a rise in delinquent businesses. 
A spokesperson for the government said they were committed to assisting small high street businesses over the next five years and were cutting rates by £13bn over this period. 

“Our £3.6bn towns fund announced by the Prime Minister last month will support towns and town centres, allowing them to attract greater footfall, jobs and investment. This includes making £1bn available as part of the future high streets fund to directly help high streets adapt to the changes we are seeing in shopping habits.”

They don’t play if you don’t pay

Every council has their own guidance regarding non-payment of business rates but they all adhere to the same overarching policy. 

If a business doesn’t pay an installment they receive a reminder notice which gives them seven days to bring their account up-to-date. If this isn’t paid then formal legal action begins. 

If the overdue installment is paid but a subsequent one is then missed then a final notice is issued for the full balance of the bill – payable within seven days with the threat of formal legal proceedings to follow if not paid. 

That’s the full balance for the year, not the outstanding payment. 

If payment is still not forthcoming then the council has many additional legal avenues available to it to recover the funds, any of which could be a serious detriment to a business:

  • Enforcement agentsthey will use bailiffs to collect goods and assets equivalent to the outstanding level of the debt including any additional fees and costs incurred
  • Charging order – if the debt is greater than £999, they can make an application to your local County Court to impose a security on the value of your property which is paid to them when sold
  • Liquidationthey can begin insolvency procedures against you and your company for non payment of rates if the debt is greater than £750. This will usually start with a statutory demand or winding up petition.
  • Committal proceedings – as a last resort, and all other recovery methods have failed then the council can petition the court to issue a summons for you to attend a committal hearing where they will ask the court to send you to prison for non payment of business rates.

Debts can become a problem if not handled correctly. If you’re struggling to pay business rates or could be in arrears for other serious creditors such as HMRC then get in touch as soon as you can

Our expert team of advisors can arrange a free initial consultation where we can discuss your options and how you can best pay these debts and still maintain your business if at all possible. Alternatively options such as liquidation or administration can be discussed if there is little prospect of repaying these debts or the company is clearly insolvent.

Contacting us as soon as you’re in trouble gives you a chance of escape. Not paying takes it away.