How non-domestic (business) properties are valued
How the Valuation Office Agency values property, including some business assets for business rates.
Non-domestic rates, also known as business rates, cover all property consisting of land or buildings not classed as domestic property or exempt.
Non-domestic rates apply to a wide range of property regardless of whether they are used for actual business purposes. They apply to, for example, beach huts and village halls as well as the shops, offices, and factories more commonly associated with business use.
Property that is used as domestic accommodation is liable to Council Tax. Find information on Council Tax and the Valuation Office Agency (VOA).
If a property has a mix of domestic and non¬-domestic uses, it will have both a non-domestic assessment (meaning it could be liable to business rates) and a Council Tax band.
New rating lists (which contain the valuations for non-domestic properties) are prepared from time to time. The last list was published on 1 April 2010 and the next is due on 1 April 2017.
Find out about the 2017 revaluation and draft list.
The VOA gives a rateable value to each non-domestic property and this is used by local councils to determine a property’s business rates. The rateable value is not the amount you pay.
A property’s rateable value represents the rent the property could have been let for on a certain date. It won’t be the actual rent paid on this date since there are many factors determining rental values (tenancy agreements, discounts, state of repair).
You can check a property’s rateable value on the VOA’s valuation tool.
Setting a rateable value
For the majority of properties that are rented, there are three stages to a valuation:
- The VOA collects rental evidence (passing rent and rental agreement details) for most non-domestic properties (either by sending out forms, known as ‘forms of return’ or by visiting properties. This evidence is analysed and adjusted by VOA surveyors to ensure that all evidence is considered o the same basis. The basis will be different, depending on the type of property (so pubs and bed & breakfast properties are valued using a different method from shops, for example)
- They set common basic values per square metre for similar properties in the same area
- The VOA then adjusts the basic value per square metre to reflect the property’s individual features and applies this to the floor areas
Measuring properties and applying values
The VOA groups similar properties in the same area together to make sure that they value them fairly and consistently. This is called a ‘valuation scheme’.
All properties in the same scheme will be given a value from the same value range. The VOA makes assumptions about these similar properties and if a property is different from these assumptions the VOA adjusts the property’s value.
For example, if, in a particular valuation scheme, the VOA assumes that there is no fire protection, but one of the properties in that scheme has it, they will apply a higher value to that property.
Most types of property are valued by a method known as ‘rental basis’, following accepted valuation practice. Shops are generally valued on a ‘zoning’ basis whereas offices or industrial property will be valued on a ‘main space’ basis.
Properties that are not normally rented, such as hospitals and schools are valued using the contractor basis. This looks at the cost of replacing the building and, after adjustment, takes a prescribed percentage of that cost as the rateable value.
Property where the rental value is usually linked to turnover or throughput such as pubs or petrol filling stations may be valued using their trading potential as an indicator of value. This is known as the receipts and expenditure basis.
Specific property type valuations
The VOA measures all properties using standard measuring methods, which comply with the measuring code approved by the Royal Institution of Chartered Surveyors (RICS).
The net internal area (NIA) method of measurement is generally applied to:
- other retail premises, such as banks, hairdressers, restaurants
The gross internal area (GIA) method of measurement is generally applied to industrial property such as warehouses or manufacturing units.
You can find out the method used for a particular property by looking at its valuation scheme.
Watch VOA videos on measuring properties
You can watch VOA videos to learn more about how particular business properties are valued and how the VOA values and measures properties on the VOA’s YouTube.
Assets included in a valuation – plant and machinery
The VOA will also include certain business assets in their valuation. Plant and machinery adds value to a property and therefore certain types of plant and machinery are likely to be shown separately in a valuation. These include: air compressors; standby generators; security cameras.
View your valuation
You can view a summary of properties’ values in the VOA’s valuation tool.
Calculating the business rates bill
Every local authority takes the rateable value of each property and uses a multiplier - set by the Department of Communities and Local Government (DCLG) to calculate the business rates bill. There is one multiplier for London, one for the rest of England and one for Wales (set by the Welsh Government).
Example of how a multiplier is used
The VOA sets the rateable value of a property at £20,000.
The DCLG has set the multiplier for that year at £0.4721 (this changes each year).
The local authority multiplies the two figures and the business rates bill total is: £9,420 (local authorities will apply reliefs to any figures so the initial calculation is a basis, before individual properties and circumstances are taken in to account).
Find out more in our guide to reliefs.
Use the VOA’s business rates estimator to estimate your rates bill.