Guest expert Paul Giness sheds some light on the recent rise of media coverage surrounding business rates.
Business rates have never been more popular, or should I say business rates have never been more talked about! Business rates attract over £20billion each year for the Government and are therefore a very good source of income into the overall tax pot. I think there are three key topical issues affecting business rates, which have caused this recent increase in press attention.
Firstly, there is the ever tighter control of the empty rates provisions which are now much less generous than pre-2010.
Secondly, the 2 year delay to the next revaluation (put back to 2017), announced in October 2012. Initially this revaluation delay announcement seemed to go rather unnoticed in the national press, despite surveyors getting rather het up about it. However, the full impact of this delay is now starting to show itself with a perceived imbalance as companies have been negotiating competitive rents, compared with overbearing rates charges, linked to historic rents prior to the credit crunch.
Finally, we are also starting to see a shift in attitude by local authorities as the full impact of the Business Rates Retention Policy is starting to show itself, which effectively allows councils to retain a proportion of the business rates income they collect. This could manifest itself for example in certain aspects of empty rates relief, which are discretionary.
The 2 year delay to the 2015 revaluation means that some organisations who have suffered greatly during the credit crunch will be extremely disappointed whilst organisations located in areas of high growth will effectively be let off the hook. Whether you are a winner or loser by the delay to the revaluation depends on what has happened to rents on your property compared with the national average. For example large swathes of the retail sector are up in arms whilst occupiers in London’s West End are quietly going about their business.
Much can still be done though and all is not lost in terms of looking for savings opportunities. Reductions can be achieved through appealing the rateable value on your property which is effective from April 2010 to March 2017.
In the leisure sector careful consideration should be given before appealing as the basis of valuation can be somewhat complicated based on the usage of the property, the type of operation e.g. bar, restaurant or hybrid and the split between wet and dry trade, plus the prevailing uses of comparable properties in the vicinity.
Simply put restaurants are valued on an equivalent rental basis, whereas bars and pubs (with a large predominance of wet trade) are valued based on the analysis of their trade leading up to 2008. Surveyors with expertise in the leisure sector can question operators on the nature of their business, conduct an analysis of their trade and look at comparable rents (if relevant) and determine if an appeal should be lodged. This is a useful exercise even if you only end up receiving a free health-check!
If a property is vacant the general rule of thumb is that empty rates relief runs with the ‘property’ and not the occupier, therefore, if a previous owner/occupier has already claimed the relief, you may not be entitled to further relief. However, this does not preclude looking to temporary rates relief if part of the property is not occupied. Plus if a redevelopment is stretched over a longer timescale and the property is not capable of occupation, advice could be taken to remove the assessment from rating. Of course, you will then definitely be on the Valuation Officers radar once the works are complete which could result in an increased rating assessment, so it sometimes comes down to a judgement call.
In summary business rates will continue to attract increasing press attention, particularly as the perceived imbalance continues with ever increasing charges, counterbalanced with the Government looking to bring in more fairness, which in the short-term I feel means lots of tinkering.
Occupiers should consider taking advice to minimise rates bills, as scope does exist for savings. It will also be interesting as we approach April this year, as this is the intended valuation date from which the Valuation Office will base all the new rating assessments, if the 2017 revaluation goes ahead as planned!
Paul Giness is a partner in The Beattie Partnership, a firm of specialist rating Chartered Surveyors covering all aspects of property tax for organisations across the UK.
Paul Giness, The Beattie Partnership, 145-147 St John Street, London, EC1V 4PW
0207 183 8321