What’s happening?

The new business rates assessments will be based on April 2015 rental values to provide – hopefully - a more accurate reflection of the building’s value. Our current business rates are based on April 2008 rental values and there has been significant rental movement between April 2008 and April 2015, where in some parts of the country, rents have risen significantly, while in other areas, rents have fallen considerably.

Usually, the Revaluation happens every five years, but the last one – scheduled for 2015 – was delayed by two years as the market was facing an uncertain future. Many argue the market is now more uncertain and that the changes will be even bigger because of the delay.

It will impact all businesses across the office, retail and industrial sectors, who should be preparing for a new rateable value, which has already been released by the Valuation Office Agency but revised rates bills will not be issued until February/ March 2017.

Mounting costs

As part of the Revaluation, the government will reduce the Uniform Business Rate – known as the ‘multiplier’ – to offset the overall change in rateable value. Indeed the rates a business pays represent a percentage of the Rateable Value which is typically around 50%. It claims that, overall, the levels received by the government will remain the same but will be more fairly distributed across the country.

While the government claims there will be no additional income from the changes, it certainly doesn’t mean that some businesses won’t see additional costs, as many businesses will face enormous rates increases.

The central London office and retails markets, which have experienced considerable growth in recent years, will see steep increases. Smaller towns, however, have seen rents fall in recent years so could see their rateable values reduced, particularly in the retail sector.

Retailers look set to be hit hardest, with figures suggesting their overall payments will rise by £465.8m a year on average for the next five years, The Guardian has reported.

The government has announced some transitional relief, whereby if a business sees a significant Rateable Value increase, then the increase will be limited on a year by year basis but reports suggest that for properties worth over £100,000, the transitional rate will be circa 43% so if the rates rise by less than this, then there will be no relief. Previously, transitional relief was much lower. Also, there will be downward transitional relief whereby big businesses who may be expecting significant rates reductions will suffer from downward transitional relief which will limit the annual decrease in business rates and this may be as low as 5%. This means if your property is valued at 30% less your rates will only drop by a maximum of 5%.

For retailers, this is devastating news as they have been suffering from inflated valuations as many were valued before the recession. The new rates might reflect their new lower value but the retailers won’t see much benefit from it.

Appealing your valuation

Business rates are a major property expense that is sometimes overlooked by occupiers who are also often unaware they can challenge their valuation to potentially achieve considerable reductions.

With the new Revaluation, businesses need to be aware of their ability and right to challenge the valuation imposed by the government via firms of Chartered Surveyors such as Strutt & Parker. Challenges can be made from April 2017.

There are a number of ways in which to challenge your business rates:

• Valuation tone per square metre. Rateable Value are calculated as a rate per square metre of the rental value of the property as at 1st April 2015. You could argue that this value is too high by reference to comparable evidence.
• Valuable area. What classes as business floor space can be disputed with the VOA. A lower area could lead to a lower valuation.
• Disruption. Many things can affect the value of a property – one of which is building works or major works near your building that causes disruption to the rates payer.
• Vacant property. If you can prove the property is vacant - either in part or fully – you could get rates relief.