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Businesses need to prepare for rates re-evaluation

Published on Tuesday, 11 October 2016

Some businesses could be in for a shock when the business rate revaluation, when the property market is valued and rates set accordingly, takes place next year.

 

The last business rates valuation was undertaken as the economy nosedived in 2008 and the revised Rateable Values (RVs) were put in place in 2010 (Business rates), making them out of kilter with the market and out of synch for several years. In some cases rental values bear little correlation with rateable values.

 

Values were released in a draft list on 30 September and can be found here (correct your business rates) although the Valuation Office Agency (VOA), which has the responsibility of ensuring valuations are as accurate as possible, is urging businesses to check their new rates and collate any evidence should there be a discrepancy.

 

Even though there have been calls for rate reform for years, the fact that there has been no rating revaluation for so long means many businesses and landlords are not tuned into the changes so could be staggered at how much they will now have to pay whilst in other areas, values have fallen so low that there are businesses paying more in rates than they are in rent.

 

A rating revaluation was due in 2015 and was to be based on April 2013 market rental values, but it was postponed until 2017. In the two intervening years, rents have rocketed to record levels in London and across the south east whereas other markets have seen a decline in High Street rents yet their rateable values remain at a much higher level.

 

From 2008 to 2017, the economy has hit some of the lowest levels in recent memory followed by recovery, and it is against these complexities that the revaluation has taken place. In London and the south east where property values are at an all-time high, business rates are likely to be set startlingly high which is likely to be a shock for many companies, whilst other areas which have struggled over the same period, could be on the end of some well deserved respite.

 

In the last Budget, when the then Chancellor George Osborne announced the handing of responsibility for rates collection and retention to local authorities by 2020 and the 100% small business rates relief threshold was extended from rateable values of £6,000 to £12,000, there seemed to be cause for celebration. However, the revaluation is likely to mean many small businesses will no longer qualify. Not only that, businesses with a large property portfolio across the country will need to prepare for an increase in administration following the devolution of the rates process.

 

The revaluation will see the biggest multiplier (the multiplier set by the government to calculate business rates) introduced since the rates system in its current form began in 1990. Back then the rateable value of every pound was 34.8p increasing to 41.4p in 2010, now some commentators expect that to be in the region of 49.8p (2017/18) (2017 rating revaluation).

 

Concerns over rates collection and management by local authorities once devolved have also been raised. The government has moved to a more welcome standardised and digital process, the question is whether local authorities are geared up to deliver the same standard of service or, indeed, cash strapped as they are, whether they have the funds to put effective processes in place.

 

Businesses and landlords will also have greater responsibility in providing accurate information as part of the new ‘Check, Challenge, Appeal’ or CCA process, if given the go-ahead. For businesses ensuring the VOA’s valuation assessment is accurate is vital, especially as it is still dealing with appeals following the 2010 List. According to Colliers, the VOA has 200,000 appeals to deal with following the 31 March 2015 deadline in addition to its 300,000 backlog.

 

The new rating list will be in place by April 2017 when the new rates will be charged.



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