RSS feedsWhat are business rates and how can I avoid paying them?
Business Rates are a government tax that raises approximately £22bn every year payable on 1.75 million premises throughout the UK. Very few business premises escape the reach of this tax. Aside from the main property classes of offices, shops, factories and warehouses the occupiers or owners of properties as diverse as car parks, schools, hotels and hospitals are also liable for rates. The principal exclusions from liability are certain agricultural and religious premises.
How exactly are rates bills calculated?
The rates bill is calculated by multiplying the ‘rateable value’ on a property by the national ‘uniform business rate’ (UBR). England, Wales and Scotland all set their own UBR, which rises each year in line with the RPI. The current UBR in England and Scotland is 0.444p and Wales is 0.448p. Reduced charges are potentially available on smaller properties and for premises occupied by charities. In some areas, supplements are added to the rates bills to finance locally based improvement schemes. Although rates bills are issued by the local council, the income collected goes into a central pool for redistribution by the government. The local council normally permits a bill to be paid over 10 instalments. The highest rateable value in England is on Heathrow Airport at £117,260,000 which leads to an annual charge of £52,063,440. The lowest rateable value is £1.
How often are these rates revaluated?
Every five years the government carries out a nationwide rating revaluation to update every rateable value. The most recent revaluation was on 1 April 2005. The current rateable value on a property represents the government’s estimate as to the annual rental value of the premises had it been available to let on the open market on 1 April 2003. The next revaluation is due to take place on 1 April 2010. If a rates bill rises or falls significantly at revaluation, transitional arrangements limit the percentage by which a rates bill can increase or decrease in a single year.
So how can the charge be reduced for my clients?
A reduction in the rateable value will reduce the business rates payable and in many situations will be backdated to 1 April 2005 and will reduce liability up until March 2010.
The government had a limited timeframe to carry out its valuation of all 1.75 million properties liable for the tax and these were often made with incomplete information as to evidence of values on similar buildings. In addition, by its very nature property valuation is often a matter of opinion. As a result the government has already had to agree to more than 125,000 rateable value alterations following appeals. The government’s own figures estimated that, on average, the figures adopted could be 4.2% too high.
If a building is affected by a local disturbance (e.g. building works), then a temporary reduction in liability can often be obtained. On shops, for example, the opening of a competing shopping centre, the refurbishment of a shopping centre, pedestrianisation works, or the closure of a town centre car park can all potentially justify a temporary reduction in rateable value.
How do I appeal against the rateable value?
The vast majority of appeals are made by property valuers, normally members of the Royal Institution of Chartered Surveyors, who specialise in rating valuations and negotiations with the Governments Valuation Office. There are restrictions as to who can appeal and when an appeal can be lodged.
What is the status of vacant properties?
urrently, 100% relief is granted for the first three months that a property is vacant. If the property remains vacant thereafter rates are payable at 50% of the normal level. Currently, no rates are payable on vacant warehouses, factories and listed buildings. On 1 April 2008, however, the position will change in a measure that will net the government close to an additional one billion pounds in rates each year. The position on vacant listed buildings is still being reviewed.
Robert Sherwill is a partner at Allsop
