How business rate changes will affect alternative farm enterprises

Defra estimates about 72% of farm businesses in England had some diversified activity in 2024-25.

Farm shops, cafés and specialist dining experiences, storage units and renewable energy were – and remain – popular choices.

While diversification can spread risk, create employment and bolster tight farm margins, it can also bring new costs such as business rates, shifting enterprises from agricultural exemption into commercial liability.

See also: Why story and standards are key in marketing farm produce

Agricultural v non-agricultural

Hospitality, retail, storage and events businesses are typically rateable unless they fall within an exemption, while pure agricultural business use is exempt.

Only the premises and land associated with the non-agricultural activity are assessed, not the whole farm.

Mark Sanders, managing partner at Acorn Rural Property Consultants, says business rates are often low on the list of priorities for farmers, or not on there at all.

“Farmers who are just engaged in agricultural activities are in a business rates-exempt world, and so they’re just not used to having to think about them,” he says.

“When there is an awareness, it’s often overshadowed by more immediate concerns, such as the need for planning permission.”

Mark Charter, head of estate management at Carter Jonas, says retail and hospitality are under some of the greatest pressures.

“What we’re seeing is that the retail and hospitality sectors are where businesses are most struggling with additional costs as margins are already tight,” he says.

“Increases to minimum wage, national insurance, utilities alongside food cost inflation have compounded the financial burden.”

Expanding a venture, changing the use of buildings or constructing new commercial space increases the risk of business rates liability and can catch businesses off guard, even where reliefs apply, warns Mark Charter.

“It can become a barrier just as a business is ready to grow,” he says.

“The biggest impact is likely to be on businesses just below the small business relief threshold that are pushed over it by higher rateable values at revaluation,” adds Mark Sanders.

Relief

There is often concern that an assessment will automatically trigger a bill – which is not always justified.

“It shows that farmers are not aware of the small business rates relief,” says Mark Sanders.

“This provides 100% relief on business rates when the rateable value [RV] is £12,000 or less.”

For properties with rateable values between £12,001 and £15,000, the rate of relief reduces gradually from 100% to 0%.

There may also be eligibility for the supporting small business relief if a property’s bill increases with the next revaluation (1 April 2026), and the business has lost some or all of its reliefs.

Those eligible for this measure will see business rates bills go up by no more than £800 or a certain capped percentage, whichever is greater, for the 2026-27 tax year (see Gov.UK for full listing of reliefs).

Mark Charter recommends tenants and businesses explore every possible relief and prospects of challenge and appeal against rateable values.

Check, challenge, appeal

The check-challenge-appeal (CCA) system is the formal route to check and dispute RVs with the Valuation Office Agency (VOA).

The check stage is where the property details on record with the VOA are reviewed and evidence is submitted to correct factual errors.

If the VOA agrees with the amended facts, the RV is altered.

Appeals against current business rates must be filed by 31 March 2026.

“The check stage is relatively straightforward,” says Mark Sanders.

“The VOA has a statutory obligation to maintain an accurate list, so if a business points out an inaccuracy they have to have a look.”

He advises setting up a VOA account to check assessments are correct.

“Rates don’t always go up, but if they do because either the property details are wrong – like floor space or use has changed – or the wrong business type has been applied – then you want to know so you can request amendments or challenge before the deadline.”

If issues remain, businesses can move to the challenge stage, providing evidence that the valuation is wrong, and then to an appeal to the Valuation Tribunal.

A business can challenge any valuation related to the property within four months of the check decision, within 16 months of the check if there is a change to the area – such as roadworks – or if the VOA has not decided on the check after 12 months.

Unlike a check, which is all about the factual details, a challenge is against the valuation.

So, evidence must explain why the current valuation is wrong and fully support requested changes.

Appeals can be made through an independent review within four months of a challenge decision, or if the VOA has not responded within 18 months.

“Business rates are quite a specialist sector,” says Mark Charter.

“Finding the right expert who understands rural property and businesses, as opposed to high street retail or sheds or warehouses, is crucial for challenging and appealing valuations.”

See also: What’s hot and what’s not in the farm diversification market

Case study: Greendale Group

© Greendale Farm Shop

From its roots as a fifth-generation family farm in east Devon, the Greendale Group’s diversification began with the Carter family selling fresh eggs at the roadside.

It is now a multi-enterprise operation, with a growing business rates bill.

Today, alongside the group’s agricultural enterprise are retail, hospitality, commercial property, fishing and renewable energy diversifications.

These have been driven by a strategy to reduce exposure to commodity volatility, moving successfully from supermarket supply to a direct-to-customer and local wholesale model.

However, this has generated a business rates bill for 2025-26 of £200,000, which will almost certainly rise with the 2026 revaluation.

Paul James, property director of the Greendale Group, says this figure encompasses business rates applied to its Greendale Farm Shop, the group’s head office, the recently acquired anaerobic digestion (AD) plant, as well as areas the group itself occupies on its Greendale Business Park.

The farm shop alone has seen its rateable value rise from £65,000 to £97,000.

At the same time, hospitality relief given originally as a result of Covid restrictions has fallen from 75% to 40%, with a drop to about 15% on the horizon.

Although retail relief at 40% is still worth about £20,500 to Greendale, the overall bill is only heading in one direction.

“You’ve got rising values just as the support is reducing,” says Paul.

Greendale’s AD plant has seen a sharp rise in its rateable value assessment.

However, there is a sector-wide legal challenge to the valuation methodology for renewable energy generation, a methodology which generally results in high valuations.

In addition, the 200-plus tenants occupying the group’s Greendale Business Park collectively pay about £2.25m across all types of business bills – from rent to utilities and taxes.

While those liabilities, including for business rates, sit with the tenants, rising costs feed directly into rent affordability and demand for units.

“Clearly it’s not great to see rates going up,” says Paul. “It does have a knock-on affect in terms of what they are able to afford in rent.

We are keen to support independent, local businesses to help them work out what they can actually afford.”

Business rates are now built into every investment discussion.

“It’s an inevitable tax and it has to be part of the round from day one,” says Paul.

For other farmers considering diversification, his advice is simple: “Don’t treat rates as an afterthought – factor them in at the start.”