Businesses in England, Wales and Scotland have been used to five-year rating revaluation since 1990, when the Uniform Business Rate (now called the multiplier) was introduced.
The next revaluation would have been due in 2015, but on 18 October 2012 the government announced a two-year postponement of the next revaluation to 2017. They said: ”Business rates are the third biggest outgoing for local firms after rent and staff costs. This decision will avoid local firms and local shops facing unexpected hikes in their business rate bills over the next five years. As business rates are linked to inflation, there will be no real terms increase in rates over this period. This reform will provide certainty for businesses to plan and invest, supporting local economic growth.”
There had been absolutely no consultation before this announcement was made. Despite an outcry from businesses, their rating advisors and user groups, the planned postponement, part of the Growth and Infrastructure Bill, has now passed the Houses of Commons’ and Lords’ Committee stages, and now looks likely to be enacted.
The government claims to be promoting help and certainty for businesses. But they have failed to appreciate what will happen in the real world as a consequence of the postponement. Business rates are currently paid on rateable values based on rental values as at 1 April 2008, when rents were still high, following years of steady growth. Oh, how things have changed since the crises of Northern Rock, Lehman Brothers, the banking crisis and the worst recession in living memory.
The 2015 revaluation should have readdressed the balance. Rates for 2015-20 would be based on rental values as at 1 April 2013 – that is in just a few weeks’ time. 2015 is still two years away and a lot can happen
With the next revaluation almost certainly being in 2017, with a valuation date of 2015, ratepayers will have another two years of paying rates based on the now-inflated April 2008 rents, plus inflationary increases on their business rates for 2015-16 and 2016-17.
As one example – of potential thousands: In January 2012 a new unit in Meteor Park, Birmingham, was let at an average rent of £206,000 per annum. The current rateable value (based on April 2008 rental values) is £270,000. So if there were to have been a revaluation in 2015, the unit’s ratepayer could have expected a drop of 25% on their rateable value and (subject to transitional arrangements) a worthwhile reduction in their rates bill. But now their rate bills for 2015-17 will go up by inflation. This is just one example of the effects of the two-year delay.
For some areas of the UK, where rental values have gone up from April 2008 to 2013, those ratepayers would have seen an increase in their rate bills at 2015. Now they will just see inflationary increases.
So what does this mean for insolvency and rescue professionals? Many businesses will see property costs just continuing to rise, putting more pressure on them. Those hoping for some relief from 2015 will be disappointed.
But 2015 is still two years away, and a lot can happen before then. What should you be doing with your current cases? Business rates are not an issue for you if the property is empty. Not so if you are trading the property or properties.
Had the company appointed rating consultants? Where are they with appeals? These can take a long time to get processed in the system, and you need cash fast.
Can the incumbents fast-track their appeals and target any quick wins? There are rating consultants out there specifically geared up to deal with this. There are other ways to reduce rate bills on partly occupied properties while you’re winding down the business.
Calculating correct liability is an area many councils don’t get right
What about business rates that the company has paid over past years? Done deal? Not always. Rate bills are complex, and calculating everyone’s correct liability is an area many councils don’t get right.
Two areas to focus on: has the company ever overpaid, and are they due any unclaimed credits? Again, there are consultants with specialist forensic rating experience who can advise on this.
As an example, I have been dealing with a company which ceased trading in January 2013, which has a single property, and I have now learned that there is a potential overpayment of business rates made some years ago totalling nearly £440,000. This is now being pursued through the rating consultant appointed.
This forensic examination of historic business rate liabilities could form part of a standard procedure when taking on a new appointment.
Companies in administration or liquidation may well have overpaid business rates, for dozens of different reasons. These payments can be reclaimed. We have recovered over £500,000 for administrators and liquidators in the last twelve months alone. These overpayments won’t apply to everyone, but if you don’t look, you won’t know.
For further information:
Paul Easton is a director and head of business rates at the Edward Symmons Group, incorporating Edward Symmons LLP and Storeys Edward Symmons.
Please contact Paul on 0191 206 8709, or email firstname.lastname@example.org