Taxes on property have been around for centuries. The present incarnation, the Uniform Business Rate, a tax on the occupation of business premises and ownership of those that are vacant, has been with us since 1990.
Every five years the valuations of property which form half of the business rates bill calculation are revisited and evaluated. The last revaluation took place in 2010 during the global recession. The process was due to be revisited again in 2015 but was delayed and is now to be implemented this April.
The government has said that the revaluation will be “fiscally neutral.” That means it shouldn’t raise more money. However, it is going to lead to a redistribution of the tax burden.
There will be winners. There also going to be a lot of losers who will see their business rates rise substantially.
How are business rates calculated?
The actual bill that firms and organisations receive is a multiplication of:
- the rateable value of a property
- and the multiplier (also known as “the rate in the pound”) set by central, not local, government.
The multiplier rises each year by the RPI inflation rate as at September. This means the total revenue brought in by business rates should effectively be the same each year after accounting for the effect of inflation.
Why are the changes so controversial?
The draft list of revaluations was made available by the government in September 2016. While some will see their rates drop or stay static, others will see their rates rise. This is most notable for those in and around London and the South East.
This is a point noted by a spokesman for the Federation of Small Businesses (FSB): “We’re getting a lot of calls into our customer service centre asking why the revaluation is happening, what it’s all about, and why business rates have increased” adding that in London there’s now a perfect storm through a combination of increased rents, a scarcity of commercial property and now the business rates rise.
Who are the winners?
For some time, business has called for a review and help for those needing assistance paying their rates bill. The former chancellor, George Osborne, listened and announced a few reforms to the system in the March 2016 budget.
As a result, from April 2017, those businesses occupying a single property with a rateable value under £12,000 will be exempted from their business rates bill. Those that occupy a single property with a value between £12,000 and £15,000, will be given tapered relief. Those that occupy properties with a rateable value between £15,000 and £51,000, will be charged according to the small business multiplier. Only businesses with a rateable value of over £51,000 will pay the higher rate come April 2017.
Who are the losers?
There will be, as noted earlier, businesses and organisations who find themselves with a higher business rates bill because of a much higher valuation. The government has recognised that a sudden change for them might prove unworkable and too damaging. Businesses in this situation will be granted help under a transitional relief system which aims to limit the percentage increase a business will face in any one year.
The new chancellor, Philip Hammond, plans to reduce the transitional relief cap on business rates from 45% to 43% and from 50% to 32% next year. He is also giving small businesses in rural areas a tax break worth up to £2,900 per year by increasing the Rural Rate Relief.
How do I appeal my business rates revaluation?
The current (2010) revaluation appeal process has become slow and cumbersome.
To make the process faster, the government is introducing a new system that makes it much tougher to appeal. Called “Check, Challenge, Appeal”, it effectively means that those wanting to lodge an appeal will have to invest time at the start of the process. This means it will be harder to introduce evidence later.
You must supply reasons, with evidence, to support your statements at the first stage of their appeal. There may be several reasons why you would want to appeal such as an incorrect valuation or a change to the property that the valuation has not taken account of.
What should I consider before appealing?
- Before the final appeal is heard, you’ll have to pay a £300 fee.
- The process has time limits which, if missed, will lead to an automatic cancellation of the appeal – with no second chances.
- Your rates may rise as a result of the appeal.
- The government has said that the valuation will only be altered on appeal if it’s more than 15% distant from what the correct value should be.
In terms of other options, local authorities can grant discretionary relief to struggling businesses if they can prove that the rates bill threatens the viability of the firm. Other reliefs and assistance are available to small businesses, including rural relief and enterprise zone relief, but they only apply in special circumstances. You can also apply for business rate relief if there is some form of local disruption such as flooding, building or road works.