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The Government has announced that it is to postpone the next Business Rates Revaluation until 2017, in a move it says will provide tax stability to UK businesses.
However, commercial property agent Prop-Search argues that this could lead to businesses continuing to pay rates based on top of the market 2008 rents. It is therefore urging the Government to rethink its proposal to delay the 2015 Business Rates Revaluation.
Richard Baker, a Director at Prop-Search, says: “There has been no notice given, no consultation with business, and no detailed discussion of how this decision might affect economic growth. Businesses would have legitimately expected their rates liability to reduce if the 2015 revaluation had gone ahead as planned, as the new rates would have been based on April 2013 rental values.”
He adds: “Currently, businesses are paying higher rates than reflect present economic conditions and, in some places, this has led to the rates liability exceeding the rent. This imbalance has been created because the amount paid is based on a valuation that took place in April 2008, prior to the significant drop in rental levels that has occurred in most locations since then. In practical terms, what this new announcement means for businesses is that they will continue to pay higher rates for longer, which will place an unexpected and additional financial burden on them in continuingly difficult trading conditions.”
Since 1990, a five yearly revaluation cycle has been a central feature of the modern business rates system. It provides a vital balancing tool, bringing Rateable Values into line with rental values, mirroring the changing property costs across the country. Postponing the Revaluation to 2017 could widen inequities and further divorce Rateable Values from the current rental market.
The 2015 Revaluation would undoubtedly have benefited certain geographical areas and many High Street retailers, where many rentals have collapsed in value, but would have increased Rateable Values in some growth sectors, where rentals have recovered to levels of those set in 2007/08.
Richard concludes: “As always, there would have been winners and losers, however, the reduced values in those key depressed markets have been long awaited and, in many instances, planned for by businesses. Postponing the Revaluation will now delay much needed reductions and store up any increases in rents for a further two years.”
Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories and form the third biggest outgoing for small businesses after rent and staff costs. Premises are assigned a Rateable Value by the Valuation Office which is used by the local authority to calculate how much the occupier of that property should pay. Revaluations typically take place every five years, the last being in 2010 and based on 2008 rental levels
Further information or advice can be obtained from Prop-Search - Tel: 01604 492000 / 01933 223300 or its website: www.prop-search.com