Collected locally by councils but sent to central government since 1990 after changes introduced by Margaret Thatcher’s government, business rates raise billions of pounds for Westminster governments of all political persuasions. But critics say the system is inflexible and bureaucratic and has a negative impact on property investment. Some believe the current system should be reformed or replaced.
Whatever the rights and wrongs may be, it’s important to know that commercial property owners and tenants can appeal against rateable values.
Business rates advice and appeals are among the key services offered by chartered surveyors and property specialists Breakey & Nuttall. Here, Chris Stern, the agency’s Senior Consulting Rating Surveyor, explains more.
BACKGROUND
In 1950, responsibility for property assessment was shifted from local councils to central government, to ensure local valuations were independent and not prone to favouritism and corruption.
Since 1990, local authorities have been the collectors of business rates but all the money collected has been forwarded to central government. However, more recently councils have received a portion of rates collected and there are plans to make this 100 per cent within the next few years.
Business rates are an important property tax payable by occupants or people entitled to occupation of a commercial site, including the landlord if a property is vacant.
Each year, the level is made of up two factors – the rateable value and the multiplier. Both are set by central government but the money is collected by the local council, known as the Billing Authority.
The Valuation Office Agency (VOA)) is a central government organisation responsible for assessing rateable values in England and Wales. These are included in the Valuation List produced for every local authority area. The VOA was previously known as the District Valuer and Valuation Officer.
Local councils can amend bills based on changes of occupation but cannot reassess the rateable value. They are supposed to inform the national VOA of any structural changes to property that they become aware of. However, this task has generally lapsed in recent decades across the country, meaning information about commercial properties can be out-of-date and incorrect.
RATEABALE VALUE
The rateable value is usually based on a property’s hypothetical open market rent. Full revaluations are carried out periodically, usually every five years. Two years before each revaluation comes into force, an Antecedent Valuation Date is held to consider evidence to make rents reflect the same political, economic and market conditions.
Properties not valued on a rental basis are mainly those where open market evidence is not available, such as brewery-owned pubs with tied tenancy systems.
THE MULTIPLIER
The ‘multiplier’ is a pence-in-the-pound figure set by central government. This historically has risen in-line with the Retail Prices Index (RPI) but this has changed recently.
For the 2018-19 financial year, the standard multiplier was 49.3p while the small business multiplier was 48p. The small business multiplier was applied to properties with rateable values below £!8,000 in the previous financial year. However, that was increased to £51,000 in April 2018.
Small Business Rate Relief applies to properties under £15,000 rateable value. These must be the occupier’s only property which they occupy and for which they are liable for business rates, or where their other properties are below £2,900 rateable value.
For properties up to £12,000 rateable value, the relief is 100 per cent. Relief then reduces until zero at £15,000 rateable value. Currently, this means that the liability after SBBR for a £13,500 rateable value will be half of £13,500 x 0.48 which is £3,240.
However, from April 2019 all retail property under £51,000 RV was set to have bills reduced by a third for two years, potentially prompting appeals from those just over the £51,000 figure.
APPEALING
A new ‘Check, Challenge, Appeal’ system was introduced in 2017. The new process can be lengthy, said Chris, and can ultimately end up in a tribunal. However, despite the challenges, he said he has a strong track-record in winning appeals and actually enjoys the process.
He said: “Tribunals in this region are typically held in Manchester. Some people hate them but I actually enjoy them. I enjoy putting all the details together and have a proven track-record in appeals. In my entire working life, I have only lost three tribunals.
“In theory, the whole appeals process can now take between three or five years. However, in reality it’s usually completed within a shorter period. In the past, appeals could be submitted online. Now, the process is much more bureaucratic unfortunately. I’ve spent a lifetime on ratings and it’s a difficult and challenging process. But people should not be deterred from appealing.
“When appealing, the owner has to firstly ‘claim’ the property or properties with documents for evidence submitted through the Government Gateway website. The application for an appeal is then initially approved for further consideration or not.
“Claiming of property can be a major ordeal for larger organisations with numerous properties. The claiming process can take weeks and weeks of work.
“If an appeal is initially approved for consideration, then an agent has to be appointed. The Valuation Office Agency has up to one year to respond. Then agents, such as me, have four months to reply. The agency has another 18 months to respond and I then have a further six months to decide whether to go to a tribunal. So, it can take time.”
He added: “When investigating business rate issues, I’ll visit the individual property and consider three main questions. First, is it correctly assessed? Secondly, is the current rating too low? This can be quite common because the Valuation Office Agency may not have visited an individual property for years. So, we need to beware of this. Thirdly, can we reduce the rateable value?”
Re empty property, he said: “In the past, rates were not paid on empty property. However, now rates are payable. I believe this skews the entire commercial property market. Landlords focus on smaller properties because they are scared of the risks of larger buildings, in case the buildings stand empty. This rule kills property investment. It also kills shops. It’s a particular problem in less-wealthy towns.
“Overall, many critics believe the current business rates system is a negative tax. This is because it bears no relation to income. There are major concerns about its impact on local economies and the problems have been raised for years.
“Unfortunately, too many politicians shy away from business rates because it’s a complicated matter. Many politicians don’t understand it. As a result, nothing gets done.
“The government gets around £27 billion annually through the current system, which it doesn’t want to lose. Government’s don’t really care how that £27 billion is gathered. However, governments could receive £27billion in other ways, for example through VAT. We really need reform or change. In the meantime, businesses should not be deterred from appealing.
“In my experience, the current business rates system is universally-hated. It’s inflexible and bureaucratic. Lodging an appeal takes a lot of effort but that’s my specialism – I’m a frequent writer to the VOA complaints department on behalf of clients.
“I’ve years of experience working with clients in many different types of commercial properties, from SMEs and shops to large motor dealerships and operators of business and industrial estates.
“So, I’d encourage Oldham Business Edge readers to get in touch. I’m very happy to have an informal conversation first. I aim to work with people, rather than simply for them. I really try to understand what’s best for them regarding business rates.”
CHRIS STERN BIOGRAPHY
Chris Stern is a business rates specialist with 40 years’ experience dealing with property owners, tenants, local councils and national government.
He spent 30 years with the Valuation Office Agency, which sets rateable values across the UK on behalf of national government and is part of the Inland Revenue. He was also a member of the Inland Revenue Staff Association and was involved with ratings discussions at quite high levels.
Originally from Hull, Chris has worked across the UK including in Yorkshire, the North-East, London and the South-East. He has worked with Oldham-based Breakey & Nuttall for 10 years and been the firm’s in-house senior consulting rating surveyor for one year.
He is a former Rochdale Chamber of Commerce president and is a member of Greater Manchester Chamber of Commerce’s assembly. He has spoken to numerous civil servants and politicians about business rates including George Osborne, the former Conservative Chancellor.
PHOTOGRAPH by Darren Robinson