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Business Rates – What are they?
Non-Domestic Rates or Business Rates as they are more commonly known are a tax levied on commercial property in the UK currently worth approximately £26bn per annum to the Government.
Rates are based on what the property might let for were it available on the open market at the valuation date, which, for the current cycle, is 1st April 2015. This generates a properties Rateable Value (RV) which is set by the Valuation Office (an executive agency of HMRC) in England and Wales and is the key to driving liability.
The RV is then multiplied by the rate in the pound (set centrally), currently 49.9p for smaller properties and 51.2p for larger sites.
Since the inception of the current system in 1990 Business Rates for commercial property were revalued every five years. However, the revaluation in 2010 lasted seven years.
When will the next revaluation be?
The current revaluation cycle has been extended with plans for a new Rating List in April ‘21 shelved in favour of the revised date of April ‘23. The reasons for this were:
• Undertaking a revaluation in the midst of a pandemic was just too difficult for the Valuation Office and Local Authorities (responsible for the collection of Rates) whose resources were already stretched and with a large number of staff working from home
• The rental evidence on which an April 2021 revaluation would have been based (April 2019 rental values) would bear no resemblance to the post pandemic world
• A delay of 1 year to 2022 would have meant a Valuation Date of April 2020 when little or no transactions were taking place providing a scarcity of evidence on which to base the valuations
This has meant that by the end of the current Rating cycle businesses will be paying based on values set in 2015 making them 8 years out of date. A long way from the proposed plans to make Rates more closely linked to economic realities via as was previously suggested; a 3 yearly revaluation cycle.
How did the Government respond during the pandemic?
Over the past 12 months Business Rates have experienced a prolonged spell in the public consciousness.
The system is often rightly criticised for its lack of flexibility. However, throughout the pandemic, support via the Business Rates system has been the crux upon which many businesses have depended to survive. We have seen for example:
• 100% relief for those businesses occupying Retail, Leisure and Hospitality properties for the entire rate year 2020/21 with further relief granted into the current period 2021/22
• Cash grants provided based on a property’s Rateable Value
• Freeze in multiplier (the rate in the pound by which a ratepayers liability is calculated) for rate year 2021/22
• Most recently a £1.5bn discretionary fund set aside to be administered by local authorities. This is provided for businesses who were not able to benefit from the 100% relief but were still forced to close due to the various restrictions
Sounds positive, but was it all good news?
After initially engaging with industry bodies on the impact of COVID-19 as it represented a Material Change of Circumstances (MCC), the Valuation Office took the decision to step away from discussions. The Government has subsequently taken a step further in drafting legislation to rule out COVID-19 MCC appeals entirely and is instead focusing on more ‘targeted support’ such as the previously mentioned £1.5bn discretionary fund.
Are rates fixed, or are there any opportunities for reduction?
There exist established mechanisms whereby a properties RV can be challenged if it is believed to the excessive and extension of the revaluation presents those in occupation of commercial property with an opportunity:
Any review resulting in a reduction to your Rateable Value is a decrease in 6 years’ worth of fixed property cost. As this will be backdated to the start of the current cycle in April 2017 any reduction will be of material impact to your profit position.
Furthermore, every step in the property life cycle from construction, fit out and occupation, to refurbishments, reconfigurations and relocations, are all an opportunity to reduce your liability by engaging with us on Business Rates.
How do we support our clients?
At Bulleys our team of experienced surveyors work closely with our clients to understand their businesses and how their liability for rates is impacted.
We provide the following services;
• Budgeting and accrual advice during any planned or proposed alteration in your property or wider portfolio
• Review of Rateable value and including, where appropriate, making proposals to reduce via the Check, Challenge and Appeal process
• There are a number of reliefs available to ratepayers at various different stages of the property life cycle which are often not fully explored by ratepayers. We can provide a fully outsourced solution working on your behalf to liaise with local authorities and securing the appropriate relief
• Reductions in value due to disturbances in the locality including: Roadworks, infrastructure projects or adjoining building work
• Full forensic audit of historic Business Rates liability and charges
• Review of Non-Domestic Rate bills including liable periods, chargeable amounts and refund reconciliation
How do you charge for your services?
We offer a range of fee options to suit your individual circumstances but in most cases we can offer our services on a fully contingent, success related basis, meaning that any costs to you are linked directly to the benefit received.
For further details please contact Tom Green, Head of Business Rates by using the Contact us link.
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