Understanding Business Rates for Self Storage Operators

Business rates are a crucial consideration for any self-storage operator in the UK. These rates, which are a form of tax on non-domestic properties, including self-storage facilities, significantly impact the financial viability of your storage business. Understanding how rates are calculated, what reliefs are available, and how to manage these costs is essential for maintaining a successful storage facility. In this guide, we will delve into the intricacies of business rates and provide you with the knowledge you need to navigate this complex area.

We also share an interview with expert Andrew Davies from Fisher German, carried out by our partners Explorage.com. In the interview, Andrew shares his experience to give storage providers the upper hand in running a business that offers storage space. 

What Are Business Rates?

Business Rates Explained

Rates are charged on most non-domestic properties, whether you are a lease holder or a freeholder, including self storage facilities, industrial units, and office spaces. These rates are calculated based on the property’s rateable value, which is an estimate of the property’s annual rental value on the open market. The Valuation Office Agency (VOA) is responsible for assessing and assigning the rateable value to each property and is dependent on the business use and per square foot. The rates payable are calculated by multiplying the rateable value by the multiplier (or uniform business rate) set annually by the government.

Why Self Storage Facilities Pay Business Rates

Self storage facilities are subject to business rates because they are classified as non-domestic properties. Whether you operate a traditional storage facility or container storage units, you’ll need to pay business rates. The amount you pay is influenced by factors such as the size and location of your premises, the type of storage solutions you offer, and the overall rateable value determined by the VOA.

How Are Business Rates Calculated?

The Calculation Process

The calculation of business rates for self storage units is a detailed process that begins with determining the rateable value of your property. The VOA assesses the rateable value based on the property's open market rental value as of a specific date. This value is then multiplied by the business rates multiplier, which is adjusted annually by the government. The resulting figure is the amount of business rates you will need to pay.

Factors Affecting Rateable Value

Several factors influence the rateable value of self storage facilities, including the location, size, and condition of the property, as well as the type of storage services offered. Properties with a higher rental value or those located in prime areas, such as central London, will have a higher rateable value, leading to higher business rates. Conversely, facilities in less expensive areas or those offering more basic storage solutions may benefit from a lower rateable value.

Revaluation and Its Impact

Revaluation is a periodic process conducted by the VOA to ensure that the rateable values of properties reflect changes in the rental market. The most recent revaluation took place in 2017, and the next one is scheduled for 2023. Revaluations can lead to changes in the amount of business rates payable, depending on how property values have shifted in your area. It’s crucial for self storage operators to stay informed about revaluations as they can significantly impact the cost structure of your business.

Understanding Business Rate Relief for Self Storage Operators

Small Business Rate Relief

Small businesses, including some self storage operators, may be eligible for Small Business Rate Relief (SBRR). This relief is available to properties with a rateable value below a certain threshold, which can reduce or even eliminate the business rates payable. For instance, properties with a rateable value of £12,000 or less may be exempt from business rates, while those with a rateable value between £12,001 and £15,000 may receive tapered relief. To apply for SBRR, contact your local council.

Other Rate Relief Schemes

In addition to Small Business Rate Relief, there are other relief schemes available that could benefit self storage operators. These include transitional relief, which phases in changes to your business rates bill following a revaluation, and discretionary relief, which local councils can offer to businesses that meet specific criteria. Certain properties, such as those used for the welfare of disabled people, may also be exempt from business rates.

Exemptions and Relief for Certain Properties

Certain properties used for business purposes may be exempt from business rates or eligible for specific reliefs. For example, properties used to store personal belongings or those that serve community functions might qualify for reliefs that reduce the overall tax burden. It’s important to check with your local council or the VOA to see if your storage facility qualifies for any of these exemptions.

Managing Business Rates for Your Self Storage Facility

Regularly Reviewing Your Rateable Value

It is essential for self storage operators to regularly review their property’s rateable value. If you believe your storage unit’s rateable value is too high, you may be able to appeal to the VOA. Successfully appealing the rateable value could lower the business rates you need to pay, providing significant cost savings. Keep in mind that any changes in the use or size of your property could affect its rateable value and, consequently, the business rates payable.

Engaging with the Valuation Office Agency

Effective communication with the Valuation Office Agency is crucial for managing business rates. Ensure that all the details about your self storage facility are up to date in the VOA’s records. If you believe there’s an error in your property’s valuation or if your circumstances change, it’s important to contact the VOA promptly. Additionally, the VOA’s website (gov.uk) offers resources and guidance on understanding your property’s rateable value and navigating the appeals process.

Exploring Cost-Effective Solutions

Given the impact of business rates on your storage costs, exploring cost-effective solutions is vital. This might include optimising the use of space within your facility, considering container storage to reduce the rateable value, or even reconfiguring your premise to qualify for certain rate relief schemes. By managing your property effectively, you can keep your business financially sound while complying with non-domestic rates regulations.

The Role of Business Rates in Self Storage Operations

Impact on Pricing and Profitability

Business rates play a significant role in determining the pricing of storage units. Operators must factor in these rates when setting rental prices to ensure that the business remains profitable. A storage facility with high business rates may need to charge higher rents, which could affect its competitiveness in the market. Conversely, facilities with lower rates may offer more competitive pricing, attracting more customers.

Strategic Location Decisions

When choosing a location for your self storage facility, it’s crucial to consider the impact of business rates. Areas with high rateable values, such as central London or other prime locations, will result in higher business rates, which could impact your bottom line. On the other hand, selecting a location with lower rateable values, such as in the Midlands or the North of England, can reduce your operating costs and allow for more competitive pricing.

Planning for Future Revaluations

Planning for future revaluations is an important aspect of managing business rates. Since revaluations can lead to significant changes in the amount of business rates payable, staying informed about market trends and potential changes in rateable values is essential. Preparing for these changes will help ensure that your business remains sustainable in the long term.

Understanding business rates is vital for self storage operators who want to manage their operational costs effectively. By comprehending how business rates are calculated, what reliefs are available, and how to manage these rates, you can make informed decisions that enhance the profitability and competitiveness of your storage facility.

Regularly reviewing your rateable value, engaging with the VOA, and exploring cost-effective storage solutions are all strategies that can help you manage business rates more effectively. Staying proactive and informed will ensure that your self storage business thrives in a competitive market.

FAQs

What are business rates?

• Business rates are a tax on non-domestic properties, including self storage facilities. They are calculated based on the property's rateable value.

How can I reduce my business rates?

• You can reduce your business rates by appealing your rateable value, exploring relief schemes like small business rate relief, and considering property alterations.

What is the VOA?

• The Valuation Office Agency (VOA) is responsible for assessing the rateable value of non-domestic properties in England and Wales, which is used to calculate business rates.