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Updated Business Rates – Everything You Need to Know

Business expert Adam Bernstein explains everything you need to know about the business rates revaluation.

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Everything You Need to Know About Updated Business Rates
Everything You Need to Know About Updated Business Rates

The high street is fighting for its very survival. Increasing rents, new employment burdens, and the web are all taking chunks out of the profit that retailers need to exist. And fashion has not been exempted; it’s not hard to find examples of bridal shops that have suddenly closed – Birmingham based Emily Eve Bridal Boutique and Manchester’s Brides of Leigh are just two examples.

The reasons for their closures may not be apparent, but business rates are likely to have been a factor. And it’s the impact of business rates on the viability of high street retail that is of concern.

The latest business rates revaluation came into effect last April (2017) and assessed all business properties in England, Scotland and Wales based upon rental values as at April 2015. And it’s not gone down well.

Read More: Business rates a growing burden

Delayed Revaluation

As background, the government decided in 2012 to delay the planned 2015 revaluation. The thinking was that the delay would avoid firms facing unexpected hikes in their business rates bills over the next five years.

The reality, however, has been somewhat different. Looking at one boutique that has two sites. In April 2014 the rateable value of site A was £23,500, but from April 2017, that rose to £27,500. The shop moved this year to another town.

Site B was valued at £19,250 in 2010 but that increased to £21,500 from April 20171. And then there’s a boutique in London’s Soho. It’s 2010 rateable value was set at £36,000 but as from April 2017 jumped massively to £51,500. Chris Stevens, director at real estate advisers, Bilfinger GVA, thinks the delay was not kind to businesses.

Businesses cried out for help and the then government announced a review in March 2015. However, former chancellor George Osbourne announced that any reforms would be fiscally neutral. As Stevens notes, “this was not much of a surprise considering the tax revenue is over £25bn and has a collection rate close to 98%.”

Some Hope

The review offered one small ray of hope to SMEs; that from 1 April 2017 Business Rate Relief would permanently double from 50 to 100% and thresholds would rise to benefit a greater number of businesses.

“This means,” says Stevens, “that business property with a rateable value of £12,000 and below will receive 100% relief and businesses with a property with a rateable value between £12,000 and £15,000 will receive tapered relief.”

And this is the cause of the problem. As the revaluation was fiscally neutral with some businesses being exempted from business rates, others have to make up the shortfall.

Indeed, only a proportion of boutiques will operate from relieved premises. There was some other help mentioned in the March 2017 budget. Chancellor Phillip Hammond promised to cap business rate rises at £50 a month for those leaving small business rate relief, but only until 31 March 2018.

A £300m discretionary relief fund was also made available for local authorities to tackle other rates-related issues in their local areas.

Read More: Local councils given business rates control

Big Bills for Some

The revaluation was conducted by the Valuation Office Agency (VOA), part of HMRC, and the official list can be viewed at gov.uk.

The actual bill paid by business is a function of rateable value and the multiplier – the pence in the pound which when multiplied by the valuation gives the final rates bill - that the government sets each year. For small business in England for 2018/19 this is 48p and 49.3p for other firms.

New Appeals Process

The effect of rising bills, the ending of tapering relief, and any clear factual errors relating to a property will no doubt spur on appeals to the Valuation Office. But apart from higher bills following the 2017 revaluation, businesses also have to contend with a new business rates appeal system.

The new procedure, called Check Challenge Appeal, is designed to streamline the process and reduce the vast number of speculative appeals.

The process introduced three new distinct stages:

  1. CHECK – the ratepayer confirms the floor areas, rent and specification of the property. The Valuation Officer (VO) reviews these facts and, if appropriate, amends the rateable value. The ratepayer moves to Challenge after 12 months if there’s no decision.
  2. CHALLENGE – the ratepayer has four months to formally challenge the VO’s rateable value. The ratepayer must provide full supporting information, their valuation, comparable evidence and detailed reasons why the rateable value is wrong.
    Negotiations should take place before the VO issues its formal response. This stage could take up to 18 months and if an agreement cannot be reached the case is escalated to Appeal.
  1. APPEAL – the ratepayer has four months to submit an appeal to the Valuation Tribunal. No further negotiations take place and only in exceptional circumstances can new evidence be introduced. The problem for ratepayers is that the VOA requires information to be submitted online, and failure to comply with the procedures or timescales will result in the case being thrown out.
    Stevens says the process is onerous: “Whilst the new system was introduced to improve transparency and to streamline the process, we are concerned about the increased burden on the ratepayer to supply details which the VOA should already know, and the length of time it might take to agree a revised rateable value.”
    And Stevens is right. A report in the Telegraph (February 2018) noted that since 1 April 2017, when the new system for appealing business rates was introduced, and 31 December, just 1,210 valuations were challenged in England, a 99.3% fall compared to the same period after the last system change in 2010.

Seeking Help to Appeal

There are enough stories of rogue advisors who promise the earth when it comes to appealing business rates but who subsequently take the money and run. The advice on choosing a ratings surveyor is simple and the first step is to choose someone who is a chartered surveyor with professional qualifications.

This means looking for the letters MRICS after their name noting that they should also be displaying the RICS logo on their website. It makes senses to choose someone who is also a member of the Institute of Revenues & Rating Valuation (IRRV) as well as the Rating Surveyors Association (RSA).

Don’t go with an advisor that doesn’t meet these standards.

Next, you need to look for a surveyor with experience in pursuing ratings appeals that are related to retail (fashion), the property type that you occupy and your locality. Quite simply, valuing a shop in a small town will be very different from a warehouse on the outskirts of a city.

If the agent cannot demonstrate experience relevant to your particular property, don’t instruct them.

The third point is to consider who will actually deal with your appeal. If it’s a large firm, more often than not you’ll speak to a director to win your business. However, they may not actually deal with your appeal – so ask if they will be delegating to a junior or even a trainee.

Lastly, don’t engage anyone without seeking a reference from other clients. You need to check on experience, service quality and results. You only have one chance to win an appeal.

For more advice read our feature on how to tackle our changing high street

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