Like all overheads, business rates need constant monitoring. Fletcher King undertakes a wide range of services for both owners and occupiers of commercial property throughout the UK with the aim of minimizing rate liability.
Advice is given on the effects of business rate revaluations and their impact on clients’ future liabilities taking into account the increasing complexity of the calculations including transitional phasing and local supplements.
As rating advisers, our overall aim is to mitigate our clients’ rate liability within the permitted parameters of the Rating Regulations and to ensure that no opportunity is missed to take advantage of the rapidly changing legislative landscape.
All commercial properties throughout the United Kingdom are subject to a rating revaluation, normally, every 5 years. The 2017 rating list came into force on 1 April 2017 and the assessments contained therein are based upon the Valuation Officer’s opinion of the rental value of the property at a date of valuation set by Parliament.
For the purposes of the 2017 Rating List, the date of valuation is 1 April 2015 and accordingly, the assessments appearing in the Rating List reflect the Valuation Officer’s opinion of the rental value at that time. The Valuation Officer will take into account the rental evidence available in the building and other buildings in the locality at or around the antecedent date of valuation in arriving at his opinion of value. The rent and hence, rateable value, should take into account all the physical circumstances of the property including benefits such as air conditioning, raised floors etc as well as any disabilities.
Calculation of Rate liability
In order to calculate the rate liability each year the Local Charging Authority multiplies the Rateable Value by the Uniform Business Rate (UBR) which is set annually by Parliament. For 2017/18 the UBR is 0.479 pence in the pound.
Small properties, which are defined as those where the assessment is less than RV £51,001 attract a small level of relief through a lower UBR. The small property UBR for 2017/18 is 0.466 pence in the pound.
Parliament is not allowed to increase the UBR by more than the increase in RPI in any one year.
The UBR figures above apply to the whole of England with the exception of the City of London who have the powers to make an additional precept. In 2017/18 the additional precept is 0.4 pence in the pound.
There is a single UBR of 0.499 for 2017/18 notwithstanding the size of assessment.
For properties where the assessment is up to RV £51,000 the UBR is 0.466 for 2017/18 but this rises to 0.492 for properties where the assessment is RV £51,001 or above.
Cross Rail Supplement
All ratepayers in Greater London with an assessment of RV £70,000 or greater are required to pay a business rate supplement based upon the RV multiplied by £0.02 as a contribution to the construction of Crossrail. Parliament passed legislation in 2010 permitting this additional charge for a period of up to 34 years.
As a result of a rating revaluation assessments may rise or fall significantly. For example the 2017 revaluation has led to a dramatic increase in the level of assessments on central London offices whereas elsewhere around the UK provincial offices have seen their assessments stay the same or in many cases diminish. In view of the significant changes the Government announced Transitional Phasing provisions, in order that ratepayers were not faced with an immediate increase overnight in their liability where an assessment had increased. In order to pay for this relief the Government announced downward phasing provisions where assessments had reduced so that ratepayers did not get the immediate benefit of the reduced assessment.
The following table shows the maximum increases and decreases allowed under the current regulations.
The above transitional arrangements only apply in England and do not operate in either Scotland or Wales.
The Appeal Process
From 1st April 2017 there is a new three stage appeal process known as Check, Challenge and Appeal. The first stage will be purely factual where the ratepayer has the opportunity to check the facts upon which the assessment is made ie areas, age of building, specification etc. The VOA have up to 12 mths to agree the facts. Once facts are agreed the ratepayer then has the opportunity to challenge the valuation and at that stage the ratepayer has to present the rental evidence in support of that challenge. There is no encumbrance on the VOA to prove their valuation or indeed show how they have arrived at that valuation. The onus is on the ratepayer to present the case. The VOA then have up to a further 12 months to either agree that the assessment is too high or not. If they remain happy with the assessment they will issue a certificate stating the same and it is only then that the appeal procedure commences and the ratepayer would then effectively make an appeal to the Valuation Tribunal (VT) submitting a written statement of case for determination. At that point it is suggested that the ratepayer will have to pay a charge to the Tribunal which is only refundable if the appeal is accepted and the assessment reduced by the VT.
Clients are represented at the Valuation Tribunal or on appeal, before the Upper Chamber, if a satisfactory negotiated settlement cannot be achieved.