Do farms have to pay business rates?
By Robert Blair, Partner and ARA specialist
As agricultural businesses expand and modernise, many farmers are facing the issue of business rates.
If your farm has grown and now includes additional buildings for storage or packing, you may have been informed by your local council that you need to pay business rates.
However, do farms really have to pay business rates, especially when their operations are primarily agricultural?
Here’s a look at the rules surrounding business rates for farms and what you can do if you are being asked to pay them.
What are business rates?
Business rates are a tax on commercial properties. They are set by the Valuation Office Agency (VOA) and collected by local authorities.
The rates are typically applied to properties used for business purposes. In the case of farms, however, agricultural buildings have traditionally been exempted from business rates, provided they meet certain criteria.
Historically, agricultural buildings used for farming operations have been exempt from business rates.
This exemption is based on the legal definition of “agricultural buildings”, which includes structures used for farming activities such as housing livestock or storing crops.
However, this exemption only applies if the buildings are mainly used for agricultural purposes and not for other commercial activities.
The issue for expanding farms
As farms grow and diversify, the boundaries of what constitutes an “agricultural building” can become blurred.
Many successful farms are increasing their scale by adding new facilities, such as storage sheds and processing units.
These facilities are often necessary to meet the demands of larger-scale farming operations.
However, the VOA has increasingly sought to exclude certain buildings, such as processing units and storage sheds, from the agricultural exemption.
This can be a significant issue for farmers. Even though these buildings are used in the farming process, they may be considered “commercial” in nature, rather than purely agricultural, by the VOA.
As a result, farms may be charged business rates on these buildings, despite their use in agricultural activities.
Can farms challenge business rates?
Farms can challenge the VOA’s decision to apply business rates to agricultural buildings.
A recent case between the free-range egg producer Fridays and the VOA clarified how modern, large-scale farming operations can still be eligible for exemptions.
The Court of Appeal ruled in favour of Fridays, stating that buildings used for egg packing and grading were integral to the core farming activity of producing eggs for sale and, therefore, should be exempt from business rates.
This ruling made two key points that can be useful for farms looking to challenge business rates these being that modern faming can be commercial.
It can also be involved in activities that make produce marketable, such as packing or grading, which can still fall under the agricultural exemption.
What to do if you are contacted about business rates on your farm
Farming businesses are increasingly being asked to pay business rates on buildings that were once exempt.
However, with the right advice and a strong challenge based on the recent Court of Appeal ruling, there is scope for farms to successfully argue that certain buildings should be exempt due to their integral role in agricultural activities.
If you are facing business rates for agricultural buildings, it’s important to act quickly and challenge the VOA’s decision to ensure you are not burdened by these charges.