The Rent Review Specialist
Business Rates 2 - Spare a thought?
31/07/2015
Following on from my article about Business Rates in the LandlordZone Newsletter, business rates are a tax on non-domestic property, but spare a thought for the recipients… For further reading, please visit LandlordZone.
Business Rates
30/07/2015
The oldest of the UK’s taxes, with the possible exception of stamp duty, the origins of rating can be traced to before… For further reading, please visit LandlordZone.
Business Rates
01/12/2013
The Government has announced that the five-yearly revaluation of all commercial properties in England will be postponed from 2015 to 2017. Every 5 years, commencing April 1990, Rateable Values are revalued, based on rental values at the antecedent valuation date, 2 years previously. For example, 2010 Rateable Values (which came into force 1 April 2010), are based on rents at 1 April 1998.
August 1998 is generally considered (by rent review surveyors) as the turning point for rental downturn so since post-valuation events are disregarded, because they could not have been known about at the time, rents in and around April 1998 do not take into account subsequent changes in the market.
If the 2015 revaluation had gone ahead then there would have been an adjustment in rateable values based on the market as at April 2013. In many parts of the country and for some types of premises the postponement of the revaluation will lead to the continuation of artificially high rateable values until April 2017.
For the moment the postponement applies only to England.
It is reported that some of Britain’s leading retailers have called on the government to freeze business rates next year (2013/2014). I have commented in Retail Week, as follows:
"I think one has to be very careful with the subject of business rates. On one hand, it is understandable for profit-motivated retailers to not want to pay any more (than they have to). On the other, any freeze or indeed any reduction in rates payable will reduce the revenue to central Government for redistribution to county councils, and in turn the provision of council services for the public-at-large. As a tax on non-domestic property, business rates are economical to collect. The rate in the £ (UBR) is centrally fixed, the billing (local) authorities demand and enforce payment, the money handed over to central government for re-distribution to the local authorities. Whether UBR is a fairer system than before 1990 when local authorities set their own rate in the £ may not be so valid now that local authorities are having to cut-back on services to abide by central government dictum, and have to find other sources of revenue for their authority, such as increasing car parking charges in town centres. The irony there of course is that what might've been envisaged a virtuous circle has turned into a vicious circle: the more local authorities play power-games in shopping centres by increasing car parking charges, etc the less the motorist-shopper is inclined to visit the 'high street' to shop. From my limited knowledge of rating, a service I stopped providing some time ago, I think that valuation approach to Rateable Value may be flawed. Strictly, as I understand, the rating valuation should be based on vacant possession, the notional rent that the premises would let at. However, the VOA is 'lazy': instead of assessing each property afresh on its own merits, the rent under an existing lease is used as the starting point. To be fair, there is a tendency to mark down through averaging, and for the tone in many places to be below par, but that I'm told is not necessarily a valuation approach, so much as an ideological or political hint, whereby shops in primary positions in city centres are valued with exactitude, in order to 'subsidise' those in less trading positions. There are also innumerable under-valuations: many occupiers are not paying their fair share of business rates. Many reasons including the VOA using the wrong valuation category - warehouse, not trade counter, for example - or the hereditament has been altered and the VOA not informed - understandable for an owner or occupier to not want to alert the VOA to anything that might result in an increase in rates payable, but why doesn't the VOA simply comb through all the planning applications (information in the public domain) and visit the premises to check (staff shortage, I guess would be the excuse!). Another unfairness is Transitional Relief, where through a quirk of political ideology and history of the occupancy the ratepayer in one property may pay less than the neighbouring occupier: that's not a level playing field for competition. Remove the inefficiencies, scrap TR, and perhaps the proper total revenue from business rates would increase the amount in the Government's coffers and by default enable a freeze."
August 1998 is generally considered (by rent review surveyors) as the turning point for rental downturn so since post-valuation events are disregarded, because they could not have been known about at the time, rents in and around April 1998 do not take into account subsequent changes in the market.
If the 2015 revaluation had gone ahead then there would have been an adjustment in rateable values based on the market as at April 2013. In many parts of the country and for some types of premises the postponement of the revaluation will lead to the continuation of artificially high rateable values until April 2017.
For the moment the postponement applies only to England.
It is reported that some of Britain’s leading retailers have called on the government to freeze business rates next year (2013/2014). I have commented in Retail Week, as follows:
"I think one has to be very careful with the subject of business rates. On one hand, it is understandable for profit-motivated retailers to not want to pay any more (than they have to). On the other, any freeze or indeed any reduction in rates payable will reduce the revenue to central Government for redistribution to county councils, and in turn the provision of council services for the public-at-large. As a tax on non-domestic property, business rates are economical to collect. The rate in the £ (UBR) is centrally fixed, the billing (local) authorities demand and enforce payment, the money handed over to central government for re-distribution to the local authorities. Whether UBR is a fairer system than before 1990 when local authorities set their own rate in the £ may not be so valid now that local authorities are having to cut-back on services to abide by central government dictum, and have to find other sources of revenue for their authority, such as increasing car parking charges in town centres. The irony there of course is that what might've been envisaged a virtuous circle has turned into a vicious circle: the more local authorities play power-games in shopping centres by increasing car parking charges, etc the less the motorist-shopper is inclined to visit the 'high street' to shop. From my limited knowledge of rating, a service I stopped providing some time ago, I think that valuation approach to Rateable Value may be flawed. Strictly, as I understand, the rating valuation should be based on vacant possession, the notional rent that the premises would let at. However, the VOA is 'lazy': instead of assessing each property afresh on its own merits, the rent under an existing lease is used as the starting point. To be fair, there is a tendency to mark down through averaging, and for the tone in many places to be below par, but that I'm told is not necessarily a valuation approach, so much as an ideological or political hint, whereby shops in primary positions in city centres are valued with exactitude, in order to 'subsidise' those in less trading positions. There are also innumerable under-valuations: many occupiers are not paying their fair share of business rates. Many reasons including the VOA using the wrong valuation category - warehouse, not trade counter, for example - or the hereditament has been altered and the VOA not informed - understandable for an owner or occupier to not want to alert the VOA to anything that might result in an increase in rates payable, but why doesn't the VOA simply comb through all the planning applications (information in the public domain) and visit the premises to check (staff shortage, I guess would be the excuse!). Another unfairness is Transitional Relief, where through a quirk of political ideology and history of the occupancy the ratepayer in one property may pay less than the neighbouring occupier: that's not a level playing field for competition. Remove the inefficiencies, scrap TR, and perhaps the proper total revenue from business rates would increase the amount in the Government's coffers and by default enable a freeze."