Since the announcement to delay the 2015 business rates revaluation to 2017, there has been widespread confusion across the industry. Last month’s apparent Budget U-turn on some of the imminent changes to the business rates regime has created further uncertainty.
Prior to that, the headlines had screamed of businesses facing ratings demands double or more what they have been used to - and unable to appeal unfair revaluations. Business owners and the Valuation Office Agency (VOA) together called for clarity and simplicity, something that ought not to have been difficult to achieve considering what went before, with some 1 million appeals being lodged against the 2010 listing’s 1.9 million hereditaments, and a staggering 300,000 of those appeals still unresolved at the start of this year.
What has been introduced is a different, more complicated process which makes it difficult for business owners to assess their position, without the need for professional expertise, with widespread resentment at substantial increases in Rateable Values, particularly regarding certain property sectors such as renewable energy schemes. But is everything as it seems, and all just one big tax hike by local and central Government?
Check, Challenge, Appeal
From April 1st 2017, all ratepayers wishing to appeal their Rateable Value must utilise the ‘Check, Challenge, Appeal’ process. Headlines read that the process will now take up to 18 months to resolve cases, ratepayers will be tasked with supporting and analysing their own claim with substantial evidence with fines for submitting incorrect analysis.
However, on closer inspection, the ‘Check, Challenge, Appeal’ process does appear to have some merit. Our understanding is the ‘Check’ and ‘Challenge’ phases will effectively be an ‘across the table’ discussion between ratepayer and the VOA to agree facts and discuss discrepancies. The intention is that many cases will be resolved in this manner, negating the need for a formal appeal. Where an agreement can’t be reached, the ratepayer will have the right to proceed to appeal.
This sounds a sensible approach, hopefully allowing both parties to articulate their point of view prior to incurring the wrath of red tape. Whether that will be the case, remains to be seen.
Increase to the Small Business Rates Relief (SBRR) threshold
Many of our occupier clients will benefit from an increase to the SBRR threshold from April 1st 2017. Until now, only commercial properties with a rateable value of &6,000 or less qualified for 100% SBRR, providing they fit the criteria, with tapered relief up to a rateable value of &12,000. That increases to potential full relief for properties with a rateable value of &12,000 or less, and the taper applied up to &15,000.
Also, the standard business rates multiplier of &0.48 will be applied on rateable values right up to &51,000, rather than up to &18,000 currently. So many small businesses will face no business rates at all now, with others paying less, even if their rateable values have increased markedly.
Variation in Values
One issue the VOA has sought to resolve is the variation of values applied to similar properties upon business estates. In one recent analysis of an office property situated upon a business estate in Chester, values within the 2010 list ranged from &103 to &146 per sqm across broadly comparable properties. In the 2017 listing, the properties in question all have a valuation of &147 per sqm.
Whether this valuation is right or wrong is one matter, but the streamlining of values makes it increasingly difficult for the ratepayer to prove their case, with a lack of comparables available.
Budget Announcements
In the recent delivery of the Budget, the Chancellor, Phillip Hammond MP, announced three measures for Business Rates in England;
- A cap so rates rise by no more than &50 a month for small businesses losing their rate relief
- Pubs to get a &1,000 discount on business rates of less than &100,000 Rateable Value (90% of Pubs)
- &300million fund for discretionary relief for local authorities to distribute
The first measure will certainly help ease the pain for those that have seen substantial increases that take them outside of the SBRR threshold.
With the Pub industry on its knees, the news of a &1,000 discount has been met with widespread criticism, with many industry experts claiming it doesn’t go far enough to address the issues blighting the trade.
On paper, the discretionary relief fund sounds promising, but there are already serious questions being asked about how this will be split between authorities and whether the fund will be accessible to those who really need it most.
With the 2017 listing due to start in a couple of weeks, the matter is still shrouded in mystery. No doubt it will unravel quickly through Q2 and Q3 of this year, and Fisher German are ideally situated in the market to professionally advise our clients on their liability and how best to move forward.
Case Law Update
A landmark ruling in the Supreme Court has been hailed as a ‘victory for common sense’ following a long running case between S J & J Monk and the VOA.
During refurbishment of their first-floor premises, S J & & Monk sought to reduce their listing, with a Rateable Value of &102,000, to &1 citing the property description should be altered to ‘building undergoing reconstruction’.
The case was initially rejected by the VOA, a decision which was upheld by the Valuation Tribunal. The Upper Tribunal then reversed this decision before the Court of Appeal reversed that back in to the VOA’s favour.
The Supreme Court Judgement found that a valuation officer must assess objectively whether a property is undergoing reconstruction, and therefore incapable of beneficial occupation, rather than simply being in a state of disrepair.
On the facts found by the Upper Tribunal, the building was undergoing reconstruction on 6 January 2012 and the Upper Tribunal was entitled to alter the rating list to reflect that reality.
A number of industry experts have celebrated this result, including Ion Fletcher, Director of Policy, British Property Federation who commented: “We welcome the Supreme Court’s ruling today, which has put a stop to business rates being charged on property undergoing redevelopment. Taxing property owners for buildings not making any income would have had a detrimental impact on the viability of refurbishments and regeneration up and down the country. At a time when uncertainty threatens business confidence, this would have been a step too far.”
For further information email Rob Haigh here
Rob Haigh - Associate