16/02/2017

Businesses urged to prepare for April Business Rate Revaluation now

Leading regional law firm Howes Percival is urging businesses to check their new draft rateable value now, ahead of the Business Rate revaluation in April 2017, to allow enough time to plan for any increase in the business rates or prepare an appeal.

The Valuation Office Agency (VOA) published the revaluation details of just under two million non-domestic properties late last year.  The new rateable values, which have been published on the VOA’s website, are based on the rental value of properties on 1 April 2015, and will be used to calculate business rate bills from 1 April 2017.  At the same time a number of changes in rating practice, including  an increase in the threshold for Small Business Rate Relief and a appeals system will be implemented.

  • Business Rate revaluation will begin to be implemented for 2017-2018 bills; 
  • Total rateable value in England is predicted to increase by 10.6% on 1 April 2017;
  • Small Business Rate Relief thresholds to increase;  
  • New ‘Check, Challenge, Appeal’ system to be introduced.

Commenting on the changes, Howes Percival solicitor and property expert, Jamie Childs said, “While the new rates won’t come into effect until April, we are urging businesses to go online on the VOA website and check their new draft rateable value now.  This will allow businesses to plan for any increase or decrease in the business rates.

“If a business thinks that factual errors may have been made about their property it should contact the VOA to discuss this informally as soon as possible.”

Background

In the United Kingdom, business rates are a tax payable on non-domestic properties. The rates payable are calculated according to the rateable value of a property which is based on the annual market rent value of that property. The VOA revalued 1.96 million non-domestic properties in England and Wales based on their rental value on 1 April 2015 to calculate business rate bills from 1 April 2017.

What does the revaluation mean?

Draft rateable values have been published on VOA’s website, together with a tool which allows ratepayers to estimate their rates bill for 2017-18.  A multiplier is then applied to the rateable value to provide the annual business rate bill.

As a result of the revaluation current predictions anticipate total rateable value in England will increase by 10.6%. This increase will largely be shouldered by ratepayers in London and areas in the South East where property values have soared in recent years.  

A recent study1 found that properties in Dover Street, Central London could see an increase in rateable value of 415%. The same study states that properties in Lowestoft could experience a decrease in rateable value of 41%, Great Yarmouth 35% and Grantham 23%.

The Government’s own figures estimate an overall 3% and 6% decrease for business rate bills in the East Midlands and the East respectively and an estimated 11% increase in bills in London.

However, transitional arrangements mean that businesses will not necessarily see large increases or decreases in their business rate bills for 2017-18. Following a consultation, the Government is currently considering two options for transitional arrangements, each of which provides for caps on the level of a ratepayers bill (not rateable value). This means that whilst those ratepayers who are faced with an increased bill have time to adjust, those who were expecting a significant drop in business rates will not benefit from this for a number of years.

Small Business Rate Relief

Changes to Small Business Rate Relief are also expected on 1 April 2017 which will increase the thresholds for small business rate relief as follows:

  • Properties with a rateable value of £12,000 or less will benefit from 100% relief so they will not pay business rates;
  • Properties with a rateable value of £12,000 to £15,000 will attract some business rate relief on a tapered scale;
  • Properties with a rateable value between £15,000 and £51,000 will be subject to the small business multiplier.

‘Check, Challenge, Appeal’

A new system of appeals against rateable value called ‘Check, Challenge, Appeal’ is being introduced in England as of 1 April 2017. This new process seeks to resolve disagreements on rateable value at an earlier stage but this is expected to require more work earlier in the process. The Government is also planning to introduce a fee at the appeal stage which is expected to discourage some businesses from launching appeals.

In addition, the draft regulations propose to include a provision which will mean that the Valuation Tribunal should only order a change in rateable value “where their view is that the valuation is outside the bounds of reasonable professional judgement”. This could mean that even though the rateable value is increased, if this is within reasonable professional judgement, the Valuation Tribunal will not be able to order a change.

What should businesses do to prepare for the changes?

Businesses should review their estimated bill for 2017-18 on the VOA website.  This will reveal the rateable value used by the VOA to estimate the bill and should allow businesses to plan for any increase or decrease and to consider taking action against this valuation.

If a ratepayer considers that factual errors may have been made it should contact the VOA to discuss this informally. A formal appeal to the 2017 revaluation cannot be launched until 1 April 2017 and should follow the proposed ‘Check, Challenge, Appeal’ process. Ratepayers considering an appeal are advised to familiarise themselves with this new process before making the decision to proceed.

If a ratepayer is looking to reduce their business rate bill, as opposed to the rateable value, they should contact their local billing authority rather than the VOA.

Businesses can check their business rates valuation here: https://www.gov.uk/correct-your-business-rates

 

 

1Source: Colliers International (http://www.colliers.com/-/media/files/emea/uk/services/business-rates/2015-retail-rating-revaluation)