Business Rates Arrears

Managing arrears in business rates is another financial commitment that many small businesses have to deal with during periods of low activity. With business rates being one of the main sources of income for local authorities, it is not surprising that they have robust strategies that deal with non-payment. However, there are solutions provided certain strategies are adopted .

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Consequences of Non-Payment

Your business will be notified shortly after you fail to make a payment for your business rates, or if there is any shortfall. Once it appears that your business is falling further behind in arrears the local authority will begin their process of recovery beginning with letters threatening action.

Summons

If you are unable to clear the arrears that your business has accumulated and the amount continues to grow, the authority will make an application to court for a summons. Be mindful that this is not the county court we are talking of here, it is the magistrates court as non-payment of business rates has criminal implications.

Liability Order

Once the court has been able to hear your case and unless the arrears have been fully paid, it will issue a liability order. This will then enable your local authority to instruct bailiff services to recover any tangible assets from your business that may help to pay off the arrears.

Winding-Up/Bankruptcy

If there is no tangible property that can be secured from your business then insolvency proceedings will take effect. If your business is operating under a limited company then the authority will look to winding-up your business. If you are operating as a sole trader or partnership then the authority will apply for bankruptcy proceedings against you.

What solutions are there if you are in arrears?

We can negotiate with your local authority if you have accumulated arrears for business rates. Provided a structured plan that illustrates how the arrears will be cleared over time whilst your business maintains its present commitments, it is highly likely that your proposal will be accepted.
What if I did have an arrangement but did not maintain it?
Your local authority will no doubt be asking for the full outstanding amount just like a creditor would when the agreement has been defaulted. We will carry out a financial assessment of your business to establish how severe your cash-flow issue is before considering what options you may have that can be proposed to the local authority. If there is sufficient revenue coming into your business each month that can maintain your existing business rates whilst paying towards your arrears, we will propose an arrangement based on this. Depending on the amount owed and the length of time that it will take to repay, we may have to arrange some kind of security on an asset that either belongs to you or your business. This will help to avoid any recovery action being applied.
What if my business is really struggling to make ends meet?
Again, we will carry out a financial assessment of your business to see how short it is of being able to pay its monthly commitments. If the business falls well short of its commitments we will then need to consult you on whether to keep it running as it is technically insolvent. If you were to decide that you wanted to keep the business we would then need to establish why your business is in its current state, when is it likely to improve and based on what facts. Unless we are able to present a plan that illustrates how your business will be in a position to pay its commitments, it is likely that your local authority will begin or continue with recovery.
Can I settle with a lump-sum payment?
It is possible to settle with a lump-sum payment depending on the circumstances of the business and yourself as an owner. As well as this, the outstanding arrears must not be in the current financial year, they must be from previous financial years. How much that is required to settle is impossible to say as settlement cases are dealt with on a strict case-by-case basis, however, the offer must be seen as reasonable. What is deemed to be reasonable will depend on facts aside from the amount such as any assets the business has and the time required for full payment of the arrears if they opted to receive monthly instalments.