The biggest change in the Business Rates System since 1990 is about to take place. With effect from 1 April 2017 every non-domestic property in Northamptonshire will receive a new Rateable Value on which Business Rates will be assessed for the following 5 years. There are some notable increases in Rateable Value. For example the University of Northampton’s Rateable Value is going up from £387,500 to £610,000. Many local businesses will see their Rateable Value stay around the same or perhaps fall slightly following 1 April. However, there are ways in which changes to the system could be exploited to reduce liability.
How the New Appeals System will work.
The biggest change being introduced is that the old system of lodging appeals against Rateable Values is being scrapped and being replaced with a three tier system with charges being introduced. The new system is known as Check, Challenge and Appeal.
The online breakdown of the Rateable Value can be altered to show corrections which the Ratepayer or their Agent deemed to be required and the Valuation Office are invited to accept these corrections and send a notification of their decision.
Within 4 months of a request to check the Rateable Value, the Ratepayer can make a proposal to alter the Rateable Value and must provide details of the grounds of the proposal and evidence to support it. Within a period of 6 weeks, the VO must supply copies to other interested parties. The VO will determine the result of the proposal having considered the evidence.
If the proposal has not been settled within 18 months of being made or the Ratepayer is unhappy with the determination of it then an appeal can be made to the Valuation Tribunal. This appeal must be accompanied by supporting evidence and the payment of a fee of either £150 or £300 depending on the size of the property.
The information set out above is derived from draft Regulations and may be subject to amendment. However it is apparent that the appeals process has suddenly become much more complicated with three hurdles to negotiate and for the first time in the history of the Valuation Tribunal, the payment of a fee for lodging the Appeal.
A particular aspect of the new system is the need to provide full disclosure of evidence and information in support of the appeal. This provides an uneven playing field in that the Valuation Office are not required to provide any information to support the level of Rateable Value which they have assessed. An application was recently made to the Valuation Office for the disclosure of the evidence in supporting their new valuation under the Freedom of Information Act. This was refused under an exclusion within the Act.
There is a possibility that straight forward amendments to Rateable Values could be agreed in the earlier stages of the process but this will depend very much upon whether the Valuation Office has a sufficient compliment of staff to deal with these applications.
What is Transitional Relief?
Ratepayers whose Rateable Values have been reduced have been waiting a long time for these reductions to come through. This particularly applies to town centre shops where rental values have fallen but rates have still been charged at the historically high levels. In some cases, the Rateable Values are falling by as much as 25%. Unfortunately, rates bills will not fall on the 1 April in line with the reductions in the Rateable Values. This is due to a Transitional Scheme.
The Transitional Scheme is designed to phase in increases in rates so that the occupiers of offices in the city of London and other areas of high rental growth will not have to pay the full amount of the increase in their Rating liability straight away but will have it phased in. To pay for this, those who would otherwise have their rates charges reduced are also phased in. The reductions are being phased in at a rate of 5% initially for larger properties with enhanced rates for smaller properties. Similarly the rate at which the increases in liability are to be phased in will vary according to the size of the property.
With this in mind, it is essential for Ratepayers to consider whether they should make an appeal against the current Rateable Value against their premises since this will reduce the base liability or starting point for any reductions or increases following the 1 April.
Small Business Relief and how to qualify
There are two ways in which Small Business Relief can be obtained. Firstly Ratepayers which occupy a property with a Rateable Value of less than £51,000 will have their bills calculated using a lower rate in the pound which has been indicated to be 46.6p. Interestingly, this only applies to occupied premises and not to empty properties so it will be very much in the interests of property owners to occupy premises which fall vacant within this bracket rather than paying the full rate.
Small Business Rate Relief gets very interesting however at Rateable Values of less than £15,000. Any Ratepayer who occupies a property with a Rateable Value of less than £15,000 providing they only occupy one property or the second property does not have a Rateable Value of more than £2,899 then they will qualify for Small Business Rate Relief. If the Rateable Value is less than £12,000 this relief is 100% and this graduates down to zero relief at £15,000. Higher thresholds apply within London.
This presents opportunities to secure and enhance this relief. Clearly if the Rateable Value is between £12,000 – £15,000 then very careful consideration needs to be given to lodging an Appeal or possibly for arranging for part of the property to be separately occupied. Even for Rateable Values of more than £15,000, consideration should be given to whether parts of the property can be separately occupied and whether these parts would then attract a Rateable Value of less than £12,000 and obtain 100% relief.
Other Reliefs and Exemptions
There is a huge range of other reliefs and exemptions from Business Rates including a newly introduced relief for local newspapers, community amateur sports club relief, rural property relief, agricultural exemption, hardship relief and partly occupied property relief.
It is a feature of modern taxation systems that they take something that is essentially very simple (in this case you pay rates on the rental value of your property based on a percentage fixed each year) to something which is almost impossibly complicated. It is to the benefit of Taxpayers that sad individuals such as the writer of this article have devoted their working lives to understanding the taxation system and advising their clients.
Posted By: Andrew Boulter
The biggest change in the Business Rates System since 1990 is about to take place. With effect from 1 April 2017 every non-domestic property in Northamptonshire will receive a new Rateable Value on which Business Rates will be assessed for the following 5 years. There are some notable increases in Rateable Value. For example the…