The Chancellor’s Budget in March did not yield much in the way of direct good news for the commercial property market and convolution could come to characterise the new ‘Check, Challenge, Appeal’ mantra of the Valuation Office Agency when new business rates are in effect from 01 April 2017.
Business rates: Scant consolation for commercial occupiers and landlords
The new regime of business rates is imminent and businesses have been able to check their assessments on HM Government Valuation Office Agency website since last autumn.
In general, news headlines since the draft Commercial Rating List was published focused on the anticipated dramatic increase in rates – based on property values of 2010 – some commercial occupiers might face. Remember that the new rates regime would have come in to force in 2015 had a two-year stay of execution not been announced by the VOA in 2012.
Publicity about forthcoming new business rates ramped-up in the run up to the Budget speech and many commercial property occupiers were looking to the Chancellor to, at least, provide some element of small business relief.
While the Chancellor’s announcement of a cap of £600 per annum on the increase for properties coming out of business rates relief for the coming financial year (2017/2018) is welcome, bear in mind this is only short term relief. The forthcoming ratings period will have another four years to run after April 2018.
There was, as the saying goes, ‘trebles all round’ with the concession announced that publicans in properties with a rateable value up to £100,000 will be able to claim £1,000 business rates discount. But, again, the celebration probably won’t extend to another round of drinks as the full force of increased rates will need to be honoured for the balance of the rating period up to 2022.
Broadly speaking, a large proporton of the industrial, retail and office sectors in the geographical regions served by our four offices Peterborough, Cambridge, Huntingdon and Bury St Edmunds have not seen significant rises in rateable values in the new 2017 business rates list.
However, we are aware of some examples where clients will see a four-fold increase. Such a hike in business rates has an impact on a commercial occupier’s outgoings which, in turn, could place pressure on the business’s viability – with the inevitable uncertainty for occupier and landlord alike.
On a positive note, there does seem to be the acknowledgement that in some parts of the country the new revaluation business rate levels are of so severe a concern that a central fund of £300 million is being made available to local authorities. This is to provide relief to help businesses most affected by the new ratings list. Note that the relief is discretionary and so a convincing case must be made to the relevant local authority.
There is a new appeals process with three clearly defined stages ‘Check, Challenge, Appeal’ and the VOA’s intention is to reduce the volume of appeals.
Consultation with and lobbying by property experts – such as RICS – about the new appeals system has been running since the end of 2015 but the sticking points remain the same: the blanket approach, the methodology and, more importantly, the inability to access the VOA’s evidence for setting the rate for clients without going through the formal appeals process and, thereby, incurring further costs.
So far, property surveyors’concerns about the languid timescale and costs of appealing the ‘old’ business rates regime carry forward to the new one.
Incidentally, the next planned ratings revaluation will be effective from April 2022 and will be based on commercial property values of 2020. Colleagues in commercial agency are already considering how the market will play out in the coming phase and with what impact on values at the time the 2022 VOA ratings list is published.
Those of us already involved in ratings re-assessments and evidencing appeals on behalf of occupiers and landlords – under the old and new business ratings list – are more than content to live in the present for the time being.
For more information about business rates and appeals contact Martin Hughes, 01733 556490 , [email protected] or see https://www.bsm.uk.com/our-services/rating-compulsory-purchase-&-compensation/