Everything your business needs to know about business rates
Business rates have been hot news recently for all the wrong reasons. In case you have missed some of the details, we set out below some of the key issues that you need to bear in mind.
Businesses will be aware that the business rates revaluation came into force on 1 April 2017. Many businesses, particularly in London, face a significant rise in their bills, some reporting increases of 400%. To help businesses adjust, the government has introduced transitional measures to stagger the rises over 5 years, but any reductions are also staggered. Those who face large increases will be interested in the new regime for challenging the rates bill.
Challenging rate increases
From 1 April 2017 the process for challenging business rates changed to ‘Check Challenge Appeal’. The details of this procedure were released just shortly before the 1 April deadline causing concern amongst ratings surveyors. Ratepayers must register with the Government Gateway online service as will agents.
To challenge a bill a ratepayer must:
Check: ask the Valuation Officer to check certain facts;
Challenge: if the parties cannot agree then the ratepayer has 4 months from the check decision to complete a challenge form and provide supporting evidence;
Appeal: if the ratepayer cannot reach agreement with the VOA it has 18 months from submitting the challenge to appeal to the Valuation Tribunal.
The most contentious change is that the right to challenge the Valuation Officer’s valuation is to be restricted to where it is not reasonable. It is not as yet clear exactly what this means but it seems clear that fewer appeals will succeed as a result.
Monk v Newbigin - good news for developers
The Supreme Court decided in the above case that premises incapable of beneficial occupation because of works of refurbishment will often attract a zero value in the rating list. The Court of Appeal’s decision had raised the prospect of developers having to pay rates on premises undergoing substantial work which meant that developers had to make provision for rates bills amongst their development costs. The Supreme Court’s decision will amount to significant savings for many property developers.
Sainsburys & others v Sykes (VOA) - rating of ATMs
The Upper Tribunal has upheld the decision of the Valuation Tribunal that ATMs within stores should be assessed as a separate hereditament, meaning that the ATM site would be separately billed for rates. The financial impact upon affected stores is usually that there is no or minimal reduction in the rates bill for the store but an additional bill for the ATM.
The Upper Tribunal decided that sites of most ATMs will be separately assessed for rates and the rates bill will go to the banks. The exception is for ATMs that are moveable pieces of equipment within stores where they will not be separately assessed and will continue to be dealt with as part and parcel of the store. The ATMs that will be separately assessed are where the area around the machinery has been adapted for the machine, eg by the creation of a hole in the wall.
We can expect the VOA to be looking closely at how premises are being used and so if property owners share their property they need to ensure that they have agreed who will pay any rates bill if there is a separate assessment in the future.
Woolway v Mazars - seperate floors
This decision from 2015 is significant and worth mentioning. As a result of the Supreme Court decision separate floors in a building leased by one tenant but accessed through common parts will often be separately assessed. That usually means a higher rates bill.
We expect valuation officers to be looking closely at whether separate hereditaments can be created. Ultimately, local authorities are often struggling for finances and this is a way of raising income. We also expect appeals to become more difficult and early professional advice from specialist surveyors will be essential. Parties to property sharing agreements should agree carefully who will pay the rates bill if the basis of assessment changes. Business rates will continue to hit the headlines but with careful management nasty surprises can be avoided.
For more information please contact: James Souter, partner on +44 (0)20 7427 6452 or firstname.lastname@example.org or Natalie Johnston, knowledge development lawyer on +44 (0)
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