The 2017 business rates revaluation – some answers
Business rates come up for review every five years. This latest revaluation was meant for 2015, but was delayed for two years. The reason for this is not as clear as it should be. The government claims this delay was to try and even out the huge fluctuation in commercial property values in the preceding period. Depending on where you look for information on this however, it will seem that this delay is of little benefit to most business owners.
Having said this, one of the hardest hit business sectors in recent years, the licensed trade, is expected to see more than half (53%) of pubs receive a decline in rates (those pubs will only see a reduction of up to 4.1% in the first year). 8% should see no change, but a hefty 38% are expected to see an increase. Unlike most other businesses that are calculated purely on rent, pubs are valued on fair maintainable trade. This takes account of the type of pub, the area it’s in and the services it offers, such as food or sport. Because of this alternative calculation method, The BBPA (British Beer and Pub Association) quotes that pubs foot 2.8% of the total national rates bill whilst only generating 0.5% of national business turnover.
In April 2017, all businesses will be issued with a new rateable value, this is based on the business’s estimated annual rental value. The rateable value is then multiplied by an amount determined by business size and location. Until each business is issued with this valuation business owners can only estimate the true figure. A provisional rateable value is available online at the government website* but this figure will not take into account transitional relief and other supplements. The final confirmed rates that take account of the likes of transitional relief and supplements will not be available until April 2017. Information on rate relief and to see if a business is eligible for small business rate relief, rural rate relief, charitable rate relief or enterprise zone relief can be found on another government website**
As soon as a business knows what will happen to their business rates revaluation some comfort may be that there will be a 5% cap on increases for ‘smaller’ businesses. By ‘smaller’ businesses this covers businesses with a rateable value under £20,000 (£28,000 in London).
Larger properties will not be given such good news however. Properties with a rateable value of more than £100,000 can see an increase of up to 45% in rates in just the first year. This is the sector where there is likely to be the highest number of appeals. With the new appeals process in place this will not be so straight forward. Previously, if an assessment was incorrect the appeal would state this asking for it to be reduced to £1. The reasoning for this being that the final agreement would be somewhere between the assessment that was being appealed against and £1. This provided the person appealing the business rate valuation protection for every amount in between. From now on, business owners have to provide a fully evidenced document, to go forward with the rest of the appeal. This must include a revised valuation, with a specific figure, together with all the reasons why this revised figure is correct and the original assessment was wrong.
A good number of small businesses may see a reduction in their business rates but for a significant number of others if the increase has been incorrectly assessed there is a great deal of work needed to appeal. If you are a business owner it would seem the best action to take is to get your information together as soon as possible and plan any appeal early to give time for all the work involved.