19 Apr 2017
The fact we must pay taxes is a given. But what upsets many is the way they are levied, the size of the bills received and difficulties in appealing wrong decisions. Business rates are no exception, says John Hinde.
John Hinde
Job Title
IMAGE: alice_photo/Fotolia.
The latest business rates revaluation came into effect on 1 April and assessed all business properties in England, Scotland and Wales based on rental values as at April 2015.
This revaluation is two years late as the government decided, in 2012, to defer the 2015 revaluation. The thinking was the delay would avoid firms facing unexpected hikes in their business rates bills over the next five years. The reality, however, is somewhat different.
Consider a practice in the Belsize Park area of London, with a rateable value of £31,750. This rose by 17% to £37,250. A practice just south of Birmingham city centre saw a 13% rise from £16,500 to £18,750.
Chris Stevens, director at real estate advisors Bilfinger GVA, thinks the delay has not been kind to businesses. He said: “Research has suggested the decision to defer the 2015 revaluation has meant businesses in the north and midlands have faced an additional £2.3 billion from the start of the 2015-16 financial year until the revaluation in 2017.”
In his opinion, a 2015 revaluation would have rebalanced the valuations in poorer areas, and offered much-needed relief to the sectors and areas hardest hit by the 2008 economic downturn.
With such calls for an overhaul, the then Government announced a review in March 2015. However, former chancellor George Osbourne announced any reforms would be fiscally neutral.
As Mr Stevens noted: “This is not much of a surprise considering the tax revenue is more than £25 billion and has a collection rate close to 98%.”
The review offered one small ray of hope to small and medium-sized enterprises. From 1 April, the business rate relief will permanently double from 50% to 100%, and thresholds will rise to benefit a greater number of businesses.
Mr Stevens said: “This means 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.”
The effect of this is some 600,000 small businesses, occupiers of a third of properties, will pay no rates at all – a saving of up to £5,900 for each small business in 2017-18. While this is great news for small businesses, few of which will be vets, Mr Stevens noted the problem: “As the changes to business rates are to be fiscally neutral, the fall in revenue from this concession will need to be made up from the remaining ratepayers.”
And, that’s precisely what some – the larger ratepayers – are finding.
Some relief was mentioned in this year’s budget. Chancellor Phillip Hammond promised to cap business rate rises at £50 a month for those leaving small business rate relief. There is also to be a £300 million discretionary relief fund made available to local authorities to tackle other rates-related issues in their areas.
The actual revaluation is conducted by the Valuation Office Agency (VOA), part of HMRC, and a draft list was published on 1 October 2016, which businesses can access at http://bit.ly/1T9Tvou
Mr Stevens said: “The first thing to note is the Government set the multiplier – the pence in the pound, that, when multiplied by the valuation, gives the final rates bill – for 2017-18 at 46.6p, which is lower than it indicated back in September.
“The chancellor announced in his autumn statement those facing the highest rises in rates liability because of the 2017 revaluation would see these increases capped at 42% in 2017-18, instead of 45% as originally proposed.”
Mr Stevens thinks this a poor consolation to the occupiers of large properties who will see their rateable values increase significantly from April 2017. Medium and small properties will see increases phased at a more gradual rate of 12.5% and 5%, respectively.
But, it’s the new ratings list that will motivate firms to appeal the assessment and, where clear factual errors exist relating to a property, ratepayers should contact their local valuation office as soon as possible.
Another aspect to the 2017 revaluation is the reform of the 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.
Secretary of state for communities Greg Clark commented: “For too long we’ve had an appeals system where backlogged cases – often caused by unscrupulous agents eyeing up a fast buck – have meant unnecessary costs and uncertainty for all involved.”
Check, challenge, appeal introduces three distinct stages:
The problem for ratepayers is the VOA is likely to require all information to be submitted online, and failure to comply with the procedures or timescales will result in the case being thrown out.
The process is likely to be onerous, said Mr Stevens. “While the new system is being introduced to improve transparency and to streamline the process, we are concerned about the increased burden on the ratepayer to supply details the VOA should already know, and the length of time it might take to agree a revised rateable value,” he said.
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 his or her name, noting he or she should also be displaying the Royal Institution of Chatered Surveyors logo on his or her website. It makes senses to choose someone who is also a member of the Institute of Revenues and Rating Valuation, as well as the Rating Surveyors Association. Don’t go with an advisor who doesn’t meet these standards.
Next, you need to look for a surveyor with experience in pursuing ratings appeals related to your type of business (a veterinary practice), the property type you occupy and your locality. Quite simply, valuing a practice 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 him or her to represent you.
The third point to consider, assuming the surveyor you want to engage meets the above criteria and is not a sole trader, is who in the company will actually deal with your appeal. More often than not, you will initially speak to a director with the experience as the firm seeks to win your business. However, he or she may not actually deal with your appeal. Ask if he or she 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. Remember – you only have one chance to win an appeal.
