A Valuation Office Agency (VO) is a body set up by the UK to estimate and calculate property values for Business Rates. The agency creates property assessments that are then used by local authorities in calculating business rates, or on a proactive basis when determining how much it will cost to run your business.
As part of their duties, the Valuation Office Agency (VO) calculates the value of properties in order to determine what businesses should pay in rates. These valuations are used by local authorities to calculate business rates – where appropriate – and also create an assessment of the rental value if asked for by a prospective tenant before they make any decision about renting your premises.
The legal basis for the valuation of properties, and the business rates calculation, is the Valuation of Property (Scotland) Act 1919. The act sets out a system in which the local authority is responsible for:
issuing a notice of assessment and under section 13, must send a copy to each owner.
filing their own rate demand with the Secretary of State who, in turn, sends it to each local authority.
The process is completed by the local authority adding up all valuations to produce their assessment.
For business rates purposes only, this section contains information about special rules for vacant properties and private roads.
Businesses do not pay rates on vacant properties. If the property has been empty for 6 months, the local authority must notify the Valuation Office Agency (VO). The VO will then take a valuation of the property and make adjustments to the business rates once it is occupied. In some cases, you may be able to lease your premises to an organisation or a business. This type of lease agreement is called a DBFO (designated business for vacant premises) lease. The rent covers the costs of running your business without paying any taxes on it. If you have several different properties, you can also turn one into an office that is only used for this purpose and not as residential property.
A private road will not be eligible for business rates, except under special rules. The VO will calculate the business rates on such a road if the local authority has given prior permission. This is because the private road will have been built by the local authority and therefore falls under their management, rather than that of you as an individual or company. However, if you are an industrial user operating at a profit and occupy a part of your own private road (eg your business occupies and pays for any part of your driveway), then under special rules you may also be able to claim exemption from business rates on that portion of your property.
For the purposes of business rates, the Valuation Office Agency (VO) creates a four digit code for every property. This is primarily used by the local authorities to calculate the business rates but can be used by businesses to check their exact valuation.
The first two digits of the code refer to things such as property type (apartment, office or retail shop), ownership category (private or public), and area code:
A business will find out which area code it falls into by contacting the local authority and asking for confirmation about its area code. If you are told that you do not have an area code and would like one, then you should contact your local authority. In some cases, there may be several area codes in your town or village – in this case you should contact the local authority so that it can be clarified which code you fall under.
The third digit refers to the type of property:
The fourth digit is an assessment number used for reporting purposes. It is not used by businesses for progression purposes.
The business rates calculator you can find on the website of the Valuation Office Agency (VO) shows how your actual business rates bill will be affected by different variables: size of premises, nature of business activity and how many employees you employ. This allows businesses to make informed decisions about the scale of their premises and to calculate what they pay in rates. For example, a company with an office might find that its rate bill is reduced by 20% if it employs only one employee.