From April 2017 1.94 million non-residential properties will be revalued for business rates for the first time in seven years. A new appeals system is also being introduced with other changes in the pipeline.
New rateable values to be allocated to all commercial properties in England and Wales
Business rates are a property-based tax collected by local councils to fund local services. They are broadly based on the rental value of property.
Early predictions from the property industry suggest that revaluations will result in significant increases in London and the South East. In other parts of the country, there may be less of an impact and some areas may even see a reduction in their rateable values.
The proposed rateable values are expected to be released this month.
A brand new appeals system
Previously, the Valuation Officer’s initial assessment would be challenged as a matter of course, starting a programme of informal negotiation and ending in an appeal to a Tribunal.
Going forward, 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. In addition, digital accounts will be required in order to progress through these preliminary stages.
The new system will have time limits built in to resolve appeals but it appears likely that these limits could prevent any appeal being settled for at least 18 months. In fact it will likely take several years for appeals to be formally settled.
This change in the appeal system signals the start of a process that will transform the rating system over the next five years.
Self-assessment - Discussion
One of the reforms to the rating system that business has lobbied for is more frequent valuations. The current appeals system creates lengthy delays and inherent uncertainty. One suggestion to improve the current system is to give ratepayers responsibility to self-assess their rateable value for business rates.
If Check, Challenge, Appeal encourages a culture shift and ratepayers begin to disclose their valuation information before they appeal, then there is no reason why this disclosure can’t be made earlier and used as a basis for self-assessing rates liability.
Local councils
Local councils also have a significant role to play in the rating system being responsible for:
- billing and collection,
- the rating of new properties, and
- reliefs and exemptions.
They retain quite wide ranging statutory and discretionary powers that can support business and property development through the rating system. While it is undoubtedly the case that new funding arrangements have made it more difficult for councils to provide support, they remain important stakeholders in the rating system.
From 2020, local councils will have the ability to set lower business rates (if they can fund it) so there could be more competitive local tax rates to support business.
Going forward
The revaluation may be a trigger for businesses to think about an appeal strategy going forward, but it’s important to recognise that an increased rateable value doesn’t always lead to an increase in charge. Advice about how charges might be affected from April 2017 should be sought.
You should consider the following questions for your current portfolio:
- Have the charges been verified?
- Are the rates levied by the council legally payable?
- Have all reliefs and exemptions been considered?
It’s also worth looking at future projects for business rates. Declaring an increased rates liability now could lead to long-term savings for the next five years.
Want to know more about the changes? Check out our article on the changes to the valuation of office properties.
If you have any questions, or would like further advice on this topic, please contact Phil Vernon, Helen White or your usual PwC contact.