Following the Government’s announcement on May 6th that a ‘revaluation of business rates will no longer take place in 2021 to help reduce uncertainty for firms affected by the impacts of coronavirus’ we take a look at what this means for Billing Authorities in the year ahead and beyond.
Current forecasts
First and foremost, the cancellation of the Revaluation in 2021 effectively extends the life of the 2017 list for at least another year. This means that any forecast losses from current list appeals will require an additional year’s provision.
The AVD
Whilst the delay in the Revaluation has been announced, the government as yet has not clarified whether the Antecedent Valuation Date (AVD) will be changed also. As practitioners will be aware, the AVD is normally two years prior to the list start date, so for a 2021 Revaluation, the AVD was due to be 1st April 2019. This was obviously well in advance of the current pandemic when rental values were unaffected and would mean that rental values are artificially high. There is generally a small lag between economic downturn and rental value reductions, but economists are suggesting that one is highly likely. Therefore, business property values will take a hit at some point. If the government sticks with the two-year rule, this will create an AVD of 1st April 2020 for a 2022 Revaluation. This date is clearly right in the midst of the initial pandemic measures and it is not clear if rental values on this date will reflect the full economic effects in the proceeding short term.
If on the other hand the AVD is moved further forward to say April 1st 2021 when the situation is hopefully more settled and values are more reflective of this, this then only gives the Valuation Office one year to revalue all properties. The problem with this, other than the resourcing and timing issues will be the lack of rental evidence to support the subsequent values arrived at. In short from a Billing Authorities perspective the AVD is just as important if not more so than the revaluation date itself as it is this date that will most impact values and subsequent revenue generation.
End of List Regulations
Another point to note is that there has been no ‘end of list regulations’ for the 2021 list, so we don’t yet know whether the delay in the revaluation may impact the ‘end of list’ date or not. Either way the team here at Wilks Head & Eve believe there will be substantive numbers of Checks and Challenges put in against the 2017 figures before the end of the current list.
Forecasting Complexities
Roger Messenger, Senior Partner at Wilks Head & Eve goes on to comment “The current COVID-19 crisis will result in a larger number of Checks and Challenges, than we otherwise might have anticipated due to the potential Material Change in Circumstances. Those Checks are also likely to hasten the compiled list Checks not yet made. The result is a longer period of uncertainty and an outcome of what are likely to be substantive changes in valuation and rates income for Billing Authorities. The current extended relief schemes coupled with the Valuation issues will radically alter the rates income forecasts for many Billing Authorities.”
The Revenues Assurance division of Wilks Head & Eve ensures the firm is well placed having the only real expertise capable of reviewing this from a valuation perspective to forecast the losses on appeals. No real precedent has been set on this before, meaning that any algorithm-based system by comparison cannot hope to replicate this forensic valuation review and could only possibly be accurate quite by chance.
Ultimately a delay in revaluation will inevitably lead to many appeals and more complications to factor into the forecasting process, impacting Billing Authority rate retention capabilities in the future.
If you want to find out more about how Wilks Head & Eve can help during these uncertain times contact rmessenger@wilks-head.co.uk or atownsend@wilks-head.co.uk or call 07836 203002 for more details.