Business Rate Revaluations 2017
The changes to business rates that are set to take effect in April 2017 are already creating controversy. However for many businesses (particularly those outside London) the changes will in fact lead to reduced payments.
What are business rates and why are they being changed?
Business rates are a tax on non-residential property- i.e. commercial property. The amount that a business pays is based on how much annual rent could be charged on the premises- known as the rateable value. The rental value of the property is estimated by the Valuation Office Agency (VOA).
Business rates are generally revalued every 5 years. The changes on this occasion will be relatively high as it has been 7 years since the last revaluation. This is part of why the proposed changes are so controversial- for those who are losing out it is a bigger change than would have been the case if the revaluation was carried out two years ago.
What are the proposed changes?
The main changes are that:
- premises with a rateable value of £12,000 or less do not have to pay any rates at all - they previously had to pay 50%;
- there will be an increase to the amount that businesses can earn before they go from the standard rate to the higher rate; and
- changes to the appeals process to cut down on the number of appeals.
It is the sudden nature of the impact for many businesses and the changes to the appeals process that is creating the most controversy. The indications are that the new regime will mean that appeals are limited to those instances where the valuation is outside of the ‘reasonable margin of error’. The ‘reasonable margin of error’ is apparently going to be set at around 15%. When the difference between the 0% rate and the 100% rate is just £3000 (properties worth up to £12,000 to pay 0% rate and anything at or above £15,000 pay 100%) this flexibility over valuations is troubling.
What does this all mean?
We would suggest that you double check your draft valuation online and immediately inform the VOA if any details are incorrect. You don’t want is any unexpected surprises in the shape of a higher than expected liability in April. Areas where property values have risen will be hit hardest, meaning that affected tenants and landlords alike may want to look at ways to address this - such as reducing the rent or adding in break options. At Lawson-West we can advise on such changes and have extensive experience in helping landlords and tenants alike to navigate such uncertainty. For more information please contact our commercial property team on 0116 212 1000.
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