17/06/2011
Business Rates used to be a simple tax but it is now a highly complex source of revenue for the Chancellor. The tax is based on the rateable value of premises, which is an assessment of rental value and is reviewed every five years, based on rents payable two years earlier. The last revaluation was in 2010 based on rental values in April 2008.
In most cases there will be comparative evidence from rents of similar premises that have been agreed close to the valuation date. Some specialised premises are rarely let on market terms and their valuations are based on trading potential or construction cost.
Pubs, for example, are usually valued by reference to the quantities of food and beverages sold and public sector schools are valued according to the cost of providing them.
Calculating payments
At its simplest the rate bill is calculated by multiplying the Rateable Value by the Uniform Business Rate (effectively the tax rate). For smaller premises this is fixed at 42.6 pence in the pound for 2011/12, with occupiers of larger premises paying 43.3 pence.
Unfortunately matters are not that simple. Premises that have seen a large increase in their rateable values may be eligible for “transitional relief” limiting the size of the annual increases following a Revaluation. This is balanced by an extra charge on businesses that have seen their bills reduced!
In London premises with rateable values over £54,999 pay an extra 2p to fund Crossrail and occupiers in the City pay more again. Other parts of the country may have “Business Improvement Districts” where improvements are funded by a supplement on the rate bill.
Opportunities to reduce payments
The Uniform Business Rate is set by statute and cannot be appealed but bills should be checked to ensure that they are correctly calculated.
The Rateable Value can be challenged, either because it is excessive compared with the rental value of the premises at 1 April 2008, or because there has been a change to the property itself, or to the immediate surroundings which adversely affect the property. Examples might include adjacent demolitions, constructions or new competition.
The Valuation Officer has a duty to ensure the valuations are correct. This includes increasing the rateable value if he feels it appropriate. Therefore, before making an appeal it is important to consider whether there is any possibility the valuation might be too low. The premises may have been let at a rent higher than rateable value, close to the valuation date, or the Valuation Officer may have missed something from the valuation.
You can check your valuation on line at www.voa.gov.uk
Empty properties
Since 1 April 2008 empty premises have been subject to full business rates after an initial exemption of six months for industrial premises, or three months for other commercial property.
There are a number of exemptions and, as with other rating issues, the legislation is complex. However there are various reliefs that can be exploited to mitigate the incidence of empty rates.
The Business Rates tax has become complex and ratepayers in doubt about whether they have been properly charged, or whether they could make savings, are advised to contact a specialist surveyor, such as Vail Williams LLP.
