Business rates arrears happen when a company falls behind on payments to its local council for non-domestic rates, and if left unpaid the council can apply to a magistrates' court for a liability order to enforce the debt. This gives the council stronger powers to collect, including sending enforcement agents (bailiffs) or, in serious cases, petitioning to wind up the company. Councils generally prefer a workable payment arrangement to a costly court process, and there are several stages before things reach that point.
This article explains how business rates arrears build up, what a liability order allows the council to do, and how enforcement typically progresses. It also looks at reliefs you might be missing and how to open a conversation with the council before matters escalate.
How business rates arrears build up and the reminder notices
Business rates arrears usually start small: a missed instalment, a change of address the council doesn't have on file, or a dispute over rateable value while payments still fall due. Most councils bill rates in ten monthly instalments, and if a payment is missed, the council will typically send a reminder notice first.
A reminder notice usually gives you seven days to bring payments up to date. Miss that, and the whole year's remaining balance can become due immediately, often followed by a final notice for the full outstanding amount. If a company is already juggling several creditors, rates arrears can quickly become part of a wider business cashflow crisis rather than an isolated bill.
The council's summons and the liability order
If the final notice is ignored, the council applies to the magistrates' court for a summons. This adds court costs to the debt and sets a hearing date. You don't need to attend if you accept the debt is owed, though you can attend to raise a genuine dispute about liability, not simply an inability to pay.
At the hearing, magistrates grant a liability order under the Local Government Finance Act 1988 if the rates remain unpaid. This is a formal court order confirming the company owes the debt and giving the council legal authority to enforce it.
What a liability order lets the council do
Once a liability order is granted, the council has several enforcement routes available. It can choose whichever seems most likely to recover the debt, and more than one route can run at the same time.
- Instruct enforcement agents (bailiffs) to take control of goods belonging to the company.
- Request information about the company's assets, income and bank arrangements.
- Apply for a charging order against company property in some cases.
- In serious or long-running cases, petition to wind up the company.
The council doesn't need to go back to court before instructing bailiffs; the liability order itself gives that authority.
A liability order doesn't expire after a set period the way some other debts do, so it can sit on record and be enforced later, including after the business rates year in question has ended. This is one reason arrears are worth addressing rather than assuming they'll be forgotten.
Enforcement agents (bailiffs) and business rates
Enforcement agents acting on business rates debts must follow the Taking Control of Goods Regulations 2013, including sending formal notice before visiting and keeping to set standards of conduct.
The process typically runs in stages:
- Compliance notice. At least seven clear days' warning before enforcement action, plus a fee.
- Enforcement visit. The agent attends to take control of goods, usually by listing them or agreeing a controlled goods arrangement.
- Sale. If the debt still isn't paid, goods can eventually be removed and sold to recover the money owed, plus fees.
Enforcement agents cannot force entry to commercial premises on a first visit in most circumstances, and fees are added at each stage, so the debt tends to grow the longer it's left unresolved.
Can the council wind up your company over rates?
Yes. Business rates arrears are treated as a normal unpaid debt, and a council can present a winding-up petition once a liability order and further enforcement have failed to recover what's owed.
A winding-up petition is a formal court application under the Insolvency Act 1986 asking the court to close the company down and place it into compulsory liquidation. It's a serious step, but councils generally use it as a last resort after bailiff action hasn't worked, not as a first response to arrears.
Empty property and relief you might be missing
Some directors pay more in business rates than they need to simply because available reliefs haven't been claimed. It's worth checking your position, particularly if premises are empty, small, or used for certain purposes.
- Empty property relief — many empty commercial properties are exempt from rates for the first three months, or six months for qualifying industrial premises.
- Small business rate relief — available for many properties with a lower rateable value.
- Hardship relief — discretionary relief some councils can grant where paying in full would cause hardship and it's reasonable given the interests of local taxpayers.
Reliefs are applied for through your local council, and eligibility depends on individual circumstances. You can check current business rate relief schemes on GOV.UK before assuming nothing can be done.
Negotiating a payment arrangement with the council
Most councils would rather agree a realistic payment plan than pursue costly court and bailiff action, especially if you contact them before a liability order is granted. Being upfront tends to lead to a more workable outcome.
- Contact the council's business rates team directly, ideally before the summons stage.
- Explain the situation honestly and propose a specific, affordable instalment plan.
- Get any agreement confirmed in writing.
- Look at the wider picture rather than negotiating this debt in isolation, especially if other creditors are also being missed.
Before you call, it helps to know roughly what the company can realistically afford each month, based on actual cashflow rather than a hopeful figure. Councils are more likely to agree a plan when the numbers are specific and honest, rather than an open-ended promise to "sort it soon".
If rates arrears are just one of several debts building up, it can help to work through the whole cashflow position rather than dealing with one creditor at a time.
Frequently asked questions
Can the council take my personal belongings for company rates arrears?
No. If the debt belongs to a limited company, enforcement agents can only take control of goods owned by the company, not your personal possessions, unless you've personally guaranteed the debt.
How long does the council give you to pay before enforcement starts?
Timeframes vary, but a reminder notice typically allows seven days, and a compliance notice from enforcement agents gives at least seven clear days before a visit. Overall, the process from a missed payment to bailiff action usually takes several weeks to a few months.
Can I dispute a liability order after it's been granted?
It's difficult. Magistrates only consider whether the rates are legally due and unpaid, not whether the company can afford to pay. Genuine disputes about liability should be raised before or at the hearing, not afterwards.
Does business rates debt rank the same as other company debts?
Business rates arrears are an unsecured debt, similar to many trade creditors. If the company becomes insolvent, they're dealt with alongside other unsecured claims rather than given automatic priority.
What happens if the company genuinely can't pay its business rates?
If arrears reflect a real inability to pay rather than a temporary cashflow gap, it's worth getting an early view on the options available before enforcement escalates further.
This article is general information, not legal, financial or insolvency advice, and every company's circumstances are different. Directors should speak to a regulated specialist about their own situation before deciding how to proceed.
If you'd like to talk it through, Harbourfirst can introduce you to a regulated insolvency specialist — start an enquiry.