Business rate changes

Business rate changes prove costly for commercial property

Business rates have been at the forefront of discussions over the last 12 months and have been propelled further into the spotlight during recent weeks after the Valuation Office Agency (VOA) published its draft rating list for England and Wales on 30 September 2016. The up-dated list is due to go live on 1 April 2017 and, given that there has not been a rating revaluation for seven years (during which time the commercial property landscape has changed considerably), it has been hailed as one of the biggest changes to the market in a generation. 

In order to calculate notional rates payable, the new rateable values will need to be multiplied by the relevant rate poundage for the 2017/18 rate year. The rate has not yet been confirmed but the Department for Communities and Local Government has hinted that it will be around 3 per cent lower than the current level. While we are still awaiting confirmation of the finer details, it is clear that the decisions that have been made so far will have a significant impact on the industry moving forward.

One of the key influencing factors is the Government’s proposed introduction of a transitional phasing scheme. Intended to cap excessive increases in liability, the phasing also has the detrimental flaw of capping decreases in order to fund the increase cap. The Government has set out two options for the transitional phasing, both of which substantially raise the cap used previously. While no decision has yet been made, the Government has stated its preferred option, which will see the upwards cap increased to 45 per cent for larger properties, and decreases for similar buildings being set at below 5 per cent.

A further change to the system is the amendment the VOA has made to the appeals process. Appeals against the current 2010 list of rateable values can, in most circumstances, be made until 31 March 2017 and can be backdated to 1 April 2015. However, the reportedly onerous ‘Check, Challenge, Appeal’ system will come into force from 1 April 2017 for appeals against the 2017 rating list. On the surface, the new ‘Check, Challenge and Appeal’ system should make the appeal process easier. However, in reality it appears to be a very complicated system that could easily lead to appeal opportunities being lost.

The full impact of the rating revaluation and subsequent changes to the system will not be known for sometime. However, what is certain is that the effect on both large and small business will be significant.

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