On 30 September, the Valuation Office Agency announced the updated 2015 property values that will be used to calculate business rates on commercial properties from April 2017. The previous revaluation in 2010, on which current business rates are based, used 2008 values. Between 2008 and 2015, across England as a whole, the value of non-domestic property is estimated to have risen by an average of around 11%.
Since revaluation is not intended to raise extra revenue, the government makes adjustments to the tax rate (known as ‘the multiplier’) to offset the changes in rateable value. According to the IFS, after adjustments, average rates bills across the north of England are expected to fall by 10% or more, while London will see an average increase of over 10%, although actual increases for individual properties in London could be much higher.
The multiplier generally increases in line with inflation in the years between valuations, although the increase was capped at 2% for 2014 and 2015. Next year, it is set to increase in line with September 2016 RPI inflation, forecast to be 1.7%. Taking adjustment factors into account, the government estimates the standard multiplier will be 0.48 next year, around 3% lower than the current level. According to the IFS, this means that properties that have seen their rateable value increase by around 3% or less can expect a cut in their rates bill next year, while those where values have increased by more than 3% can expect an increase.
The government also uses a system of transitional relief to ease the impact on those businesses facing the biggest increases. The Department for Communities and Local Government is consulting until 26 October on the detail of the transitional relief for the 2017 revaluation. The relief works by applying a cap, year-on-year, over a five year period, giving businesses time to adjust to the full increase. The level of the cap varies between small, medium and large properties. Under the proposals, the maximum increase in year 1 for a large property (with a rateable value of more than £100,000) could still be as high as 45%.
With the revaluation comes a new appeal system from 1 April 2017, which may present a more protracted process than the old system. Phil Vernon, head of rating at PwC, said: ‘Under the current appeals system, the valuation officer’s initial assessment can be challenged as a matter of course, starting a programme of informal negotiation and ending in an appeal to a tribunal. From April, ratepayers will be expected to complete two preliminary stages (check and challenge) before a full appeal can be progressed. Both stages will require full valuation detail being submitted by the ratepayer with penalties for inaccurate or misleading information. Companies will also be required to hold digital accounts in order to progress through these preliminary stages’. Even with time limits built in, he added, ‘these limits could prevent any appeal being settled for at least 18 months’.
Vernon further commented: ‘Somewhat controversially, the proposals suggest that appeals will only be allowed if the ratepayer, or their agent can prove that the valuation officer’s valuation is outside the bounds of reasonable professional judgement. It will be open to interpretation by the Valuation Office Agency and ultimately the Tribunal Service as to what that means in practice.’
The Valuation Office Agency has released a new online tool allowing ratepayers to search by postcode or street address to see their draft rateable value and get an estimate of their 2017/18 bill (see www.bit.ly/1T9Tvou).
On 30 September, the Valuation Office Agency announced the updated 2015 property values that will be used to calculate business rates on commercial properties from April 2017. The previous revaluation in 2010, on which current business rates are based, used 2008 values. Between 2008 and 2015, across England as a whole, the value of non-domestic property is estimated to have risen by an average of around 11%.
Since revaluation is not intended to raise extra revenue, the government makes adjustments to the tax rate (known as ‘the multiplier’) to offset the changes in rateable value. According to the IFS, after adjustments, average rates bills across the north of England are expected to fall by 10% or more, while London will see an average increase of over 10%, although actual increases for individual properties in London could be much higher.
The multiplier generally increases in line with inflation in the years between valuations, although the increase was capped at 2% for 2014 and 2015. Next year, it is set to increase in line with September 2016 RPI inflation, forecast to be 1.7%. Taking adjustment factors into account, the government estimates the standard multiplier will be 0.48 next year, around 3% lower than the current level. According to the IFS, this means that properties that have seen their rateable value increase by around 3% or less can expect a cut in their rates bill next year, while those where values have increased by more than 3% can expect an increase.
The government also uses a system of transitional relief to ease the impact on those businesses facing the biggest increases. The Department for Communities and Local Government is consulting until 26 October on the detail of the transitional relief for the 2017 revaluation. The relief works by applying a cap, year-on-year, over a five year period, giving businesses time to adjust to the full increase. The level of the cap varies between small, medium and large properties. Under the proposals, the maximum increase in year 1 for a large property (with a rateable value of more than £100,000) could still be as high as 45%.
With the revaluation comes a new appeal system from 1 April 2017, which may present a more protracted process than the old system. Phil Vernon, head of rating at PwC, said: ‘Under the current appeals system, the valuation officer’s initial assessment can be challenged as a matter of course, starting a programme of informal negotiation and ending in an appeal to a tribunal. From April, ratepayers will be expected to complete two preliminary stages (check and challenge) before a full appeal can be progressed. Both stages will require full valuation detail being submitted by the ratepayer with penalties for inaccurate or misleading information. Companies will also be required to hold digital accounts in order to progress through these preliminary stages’. Even with time limits built in, he added, ‘these limits could prevent any appeal being settled for at least 18 months’.
Vernon further commented: ‘Somewhat controversially, the proposals suggest that appeals will only be allowed if the ratepayer, or their agent can prove that the valuation officer’s valuation is outside the bounds of reasonable professional judgement. It will be open to interpretation by the Valuation Office Agency and ultimately the Tribunal Service as to what that means in practice.’
The Valuation Office Agency has released a new online tool allowing ratepayers to search by postcode or street address to see their draft rateable value and get an estimate of their 2017/18 bill (see www.bit.ly/1T9Tvou).
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