RECAP OF 2017 BUSINESS RATES REVALUATION
The 2017 business rates revaluation carried out by the Valuation Office Agency covered 1.97 million properties with a collective rateable value of £63 billion. Across England as a whole it led to a 11% increase in the rateable value of the average non-domestic property. Although these were somewhat unevenly distributed with the largest increases in inner London (28.4%) and values falling in the North East (0.9%).
Following the rollout of the business rates retention scheme (BRRS) in 2013-14 and the subsequent 2017 business rates revaluation the unequal spread of increases in rateable values across England led to a need for a redistribution of business rates revenues.
Furthermore the BRRS required Billing Authorities to take on the risk associated with appeals against rateable values in their area. The financial risk associated with appeals can be large and difficult to forecast if not managed in the right way, putting Councils under further pressure.
The last business rates revaluation also saw thresholds for small business rates relief increase. With 100% small business rates relief available for properties with rateable values of £12,000 or less and tapered relief up to £15,000 this resulted in 600,000 small businesses no longer paying business rates.
WHERE WE ARE TODAY
Roll on to today and we now have the antecedent valuation date (AVD) which passed on the 1st April 2019. This means Billing Authorities are now in a much better position to forecast values before the next revaluation list is published and by looking at current rental values of local properties can get a reasonable indication of what is likely to occur in the 2021 revaluation.
The check, challenge and appeal system has proven unpredictable making it difficult for Billing Authorities to forecast outcomes. This has been exacerbated by appeals coming through sporadically. As a result we expect a ramp up of challenges coming through towards the end of the list which Authorities will need to have provisioned for or face a significant budgetary shortfall.
The implementation of temporary relief schemes, whilst great in championing local businesses, have put additional pressures on Billing Authorities. The administration and application of these schemes has been resource intensive at a time when Authorities really need to be focussing on enhancing the quality and accuracy of their local lists to drive more revenue.
PREDICTIONS FOR THE 2021 BUSINESS RATES REVALUATION
Using comparisons between the 2015 and 2019 property rental values provides a good indication of what is to come. In the office sector we expect to see large increases of around 50 to 60% in Central London particularly around Westminster, mid-town and some of the City. Offices elsewhere we expect to decrease slightly due to trends in homeworking and businesses increasingly occupying smaller spaces.
It’s also worth noting in the Public Sector arena, following the merging of many Unitary and District Councils, the requirements for large civic offices is disappearing fast and, in some areas, these represent the largest occupied office space, so we may see some significant shifts in rateable values here.
Traditional manufacturing has fared about the same as the last business rates revaluation, but we don’t expect to see any significantly reduced liabilites due to the transition relief programme put in place the last time around.
Well located logistics warehouses and hubs we expect to increase, with many manufacturers stockpiling goods pending the outcome of Brexit, this is driving up rental values with smaller warehouses proving more expensive.
Unusual spaces & properties
Any sectors relying on the contractor’s basis as a method of valuation could have rateable values increase, thanks to building costs increasing. In the Public Sector, schools and potentially leisure centres could be adversely affected.
UK high streets are volatile and it’s difficult to know where we will be in two years, with more than 10% of shop stock empty now and many CVA’s in progress, rates have been reduced and rental values are already significantly down.
Out of town retail units have fared better, with rents holding steady but organisations have been downsizing and we are seeing some larger retail organisations requiring less warehouse space. On this basis we would probably expect to see rateable values decrease overall in this sector.
Rateable values by location
Geographically across England we expect to see the trend continue for London and the South East with increases in rateable values, and in the Midlands, a modest increase and the North a reduction. The East of England we predict, will see an increase in rental values due to increasing investment in technology hubs in places like Cambridge and spreading outwards as the drive for innovation takes hold.
Appeals and transition and relief schemes
There will still be a mechanism in place for appeals but whether the check, challenge and appeal scheme survives in its current form, remains to be seen.
The transition scheme is protected by statute so will continue to exist in some form to counteract any volatile fluctuations, it’s difficult to predict the liabilities in this area at present but we assume it will continue to be self-financing as in previous iterations.
There are various relief programmes currently in place but we believe the two most likely to be maintained in some way, will be the Small Business Rates Relief (SBRR) and Retail Rates Relief. SBRR because of its wide voter pool and the retail industry because it has powerful lobby groups vocal in their views on business rates.
We’d be interested to hear your views from a Local Authority perspective on the 2021 business rates revaluation. Please comment below or contact email@example.com or call 0207 907 7897 to discuss further.