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UK business rates revaluation 2017

1 February 2017

Worried about your business rates revaluation? Businesses in London and the South East are facing substantial increases. Nick Todd, Partner at Pitmans LLP, explains what to do to mitigate the impact

Business rates are a tax on the right to occupy commercial property including conference centres, hotels, restaurants and leisure destinations and can be one of the largest overheads for hospitality businesses. Business rates are based on the value of the real estate but also take into account things like the value of machinery and equipment as well as the sector in which the business is operating. Every five years the underlying value of a property is assessed by government to set its 'rateable value.' That figure broadly represents the yearly rent for which the property could be let.

The next revaluation will come into effect on 1 April 2017 with rateable values based on rental levels at 1 April 2015. The last revaluation was on 1st April 2008 and the change in values since 2008, with prices rising markedly in many parts of the South East but dropping in some other regions, mean that there will now be some very substantial alterations.

Note: A revaluation was carried out in Northern Ireland in November 2014, the first since 2003. There is no date set for the next one. This revaluation affects properties in England, Scotland and Wales but this note deals principally with the situation in England and there are regional differences with the systems for properties in Scotland and Wales (and the City of London) which are not covered here.

Will my bill increase?

The release of the Draft 2017 Rating List shows the biggest impact is on large businesses in London which could face increases of up to 45% in April. Small businesses in the regions may see reductions of up to 20%. Rates bills should start being received in February.

Transitional Relief, the scheme through which increases and decreases are phased in, is likely to be reintroduced and it is expected to last for the five years until the next rating list. However, the proposal is to introduce an extra band for applying transitional relief. The three proposed transitional bands would be ‘Small’, ‘Medium, and ‘Large’, with the latter being £100,000 rateable value and above.

The Government issued a consultation paper with two options on the level of transitional relief. The Government’s preferred option is that properties in the ‘Large’ band for transitional purposes could see liability increases of up to 45%, whereas those whose bills should be reducing significantly will have these capped at 4.1%. Rateable values in the ‘Medium’ band will still be ‘capped’ at +12.5% with decreases at 10%, whilst ‘Small’ assessments would be ‘capped’ at 5% with decreases at 20%.

The Valuation Office Agency prepares local rating lists containing rateable values for all commercial premises in England and Wales every five years which you can consult.

Are there any exemptions?

You have to apply for some types of relief:

  • small business rate relief
  • rural rate relief - if your business is in the countryside with a local population below 3,000 you can get between 50-100% off your rates.
  • charitable rate relief - Charities and sports clubs get up to 80% rate relief.
  • enterprise zone relief

Exempted buildings and empty buildings relief are applied by your local council.

You can find out more information on the government website.

From 1 April 2017 the government has said it will:

  • Permanently double Small Business Rate Relief (SBRR) from 50 per cent to 100 per cent and increase the thresholds to benefit a greater number of businesses. Businesses with a property with a rateable value of £12,000 and below will receive 100 per cent relief. Businesses with a property with a rateable value between £12,000 and £15,000 will receive tapered relief. 600,000 small businesses, occupiers of a third of all properties, will pay no business rates at all. An additional 50,000 will benefit from tapered relief.
  • Increase the threshold for the standard business-rates multiplier to a rateable value of £51,000, taking 250,000 smaller properties out of the higher rate. This will reduce business rates for many small businesses.

So businesses facing higher rates will see their bills go up in steps over the next five years. But for big businesses in places where property values have risen a lot, the increases will still be steep. However businesses that are set to benefit from lower property valuations will also see the changes introduced in stages. Their rates bills will fall gradually over the next five years.

From 1st April 2011, the threshold at which empty properties become liable to pay rates dropped from £18,000 to £2,600.

You can get help from a qualified rating surveyor through one of the following organisations

  • Royal Institution of Chartered Surveyors (RICS)
  • Institute of Revenues, Rating and Valuation (IRRV)
  • Rating Surveyors Association

Rating experts can assess, review, challenge or appeal rateable values on your behalf, achieving savings in many cases. Note: The deadline for rating appeals in relation to the 2010 rateable value is 31st March, 2017 and so you should act now if you wish to challenge your existing rates prior to this revaluation and have not done so.

Check Challenge Appeal – Important information

The Valuation Office Agency faces a backlog of tens of thousands of business rates appeals. New proposals are intended to help cut the backlog.

From 1 April 2017 the VOA will operate a new way to challenge your Rateable Value, called “Check Challenge Appeal”.

  • Check - review and confirm the facts about your property held by the VOA. Once receipt of the Check has been formally acknowledged, the VOA has up to 12 months to decide whether to accept proposed changes and amend the rateable value. If it does not agree then the matter proceeds to the Challenge stage. 
  • Challenge – once the facts are established, explain why you believe your valuation is wrong. This must be done within 4 months of the completion of the Check stage with comparables evidence and a revised valuation. The VOA then has up to 18 months to issue a Decision Notice.
  • Appeal – a formal appeal can be lodged with the Valuation Tribunal for England (VTE) within 4 months of the completion of the Challenge stage. No new evidence is permitted and a £300 fee is payable and refunded if successful. 

An appeal on your 2017 rateable value is not possible, and may not be necessary, until you have completed check and challenge.

If you would like to appeal against your business rates bill you must be able to supply your reasons with evidence to support your statements. There are many reasons you may want to appeal, including an incorrect valuation or you may have a change to your property that isn’t shown in the rateable value. A full list for grounds to appeal can be found on the government website.

The government has indicated that the VTE would only be able to change the rateable value of a property if the existing valuation was "outside the bounds of reasonable professional judgement” after April 2017. It has been suggested that this would prevent the VTE from revisiting rateable values that were up to 20% inaccurate. This is intended to accept the expertise of the VOA and ensure that resources are properly directed.

This new test could be seen as especially unfair on appealling the rateable value of a property on 'material changes in circumstances'. This could be physical changes to the property, the locality or the use of the property during the rating period, either permanent or temporary. For example where the road outside is being stopped up for works or where a competing business opens next door.

If you decide to make an appeal, you must continue to pay your business rates while your appeal is outstanding.

Finally, local authorities are able to grant relief to struggling businesses on a discretionary basis. If your rates bill is likely to seriously jeopardise the future of your business, it is worth discussing this with your local authority.

For further assistance with property matters please contact Nick Todd, Partner at Pitmans LLP Email: ntodd@pitmans.com

Pitmans is a Business Partner of the Institute of Hospitality