News and Views

BUSINESS RATES REVALUATION 2017 BRIEFLY EXPLAINED

MYTHS 

1.   Rate liability uplifts  could exceed 400%. 

2.  Accuracy of valuation of with a margin of error of 15% is acceptable. 

3.  Predictions of 1/3 of Independent shops closing due to Rates increase. 

4.  Link between residential house prices and business rates assessments exists.

5. The Government claimed that the Check, Challenge, Appeal system will speed up the appeals process.

TRUTH

A. Definitions of size of property:  Medium size property is £28,000 Rateable Value (RV) and above in London and £20,000 RV elsewhere;   Large size property is £100,000 RV or above. 

B.  The basis of valuation for Business Rates purposes is the Open Market Rental Value of the property on the 1 April 2015. A rise in rent will therefore usually lead to a rise in Business Rates.     

1.  Small properties face a maximum increase over 5 years of 64% with a capped  5% uplift in the first year. Large properties maximum uplift is 42% in the first year, with a ceiling increase of 243% over the full 5 year life of the 2017 Rating List (assuming annual inflation @ 2% pa).  Medium sized businesses face a maximum increase of 12.5% in the first year and 147% over 5 years, but these are MAXIMUM figures which will only apply to a small number of firms located in areas which have seen very high rental growth of at least 132.5% since April 2008. Rates liability is falling for many ratepayers and approximately 600,000 small businesses will pay no business rates. Properties with a rateable value of £12,000 and below will receive 100% relief.  Those with a rateable value between £12,000 and £15,000 will also benefit from some relief. 

2.  Not true. The Valuation Tribunal for England can award any scale of reduction they decide.  

3.  Most unlikely – If a small business cannot afford an increase in rates liability from say £8000 to £8400 in one year,  it is almost certain that the business rates are a minor problem compared to their general lack of profitability. 

4.  House price change is not a factor in the calculation of Business Rates.

5. Under the timetables prescribed by the Government it could take a minimum of 22 months to actually get to the appeal stage. 

This combined with the existing backlog of appeals in London is likely to mean it will be 3 years and longer before most appeals are concluded.

Notes 

Newton Perkins research has established that there are only 54 office assessments in London which face the maximum uplift allowed over 5 years in business rates.  

Of those:  NONE are located in the City of London;  4 are located in the City of Westminster (of which 3 are within the same building in Clifford Street) .  Of those 54 offices, 26 have rating assessments below £20,000 RV and only 10 have assessments of over £100,000 RV. 

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