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How hospitality can prepare for the next business rates assessment

By Richard Wackett

- Last updated on GMT

How hospitality can prepare for the next business rates assessment

Related tags: Taxation in the united kingdom, Business rates in england and wales

Ahead of the next revaluation of business rates in April next year Richard Wackett, a partner at Montagu Evans, addresses hospitality operator's potential concerns. 

Business rates are a charge on the use and occupation of commercial premises and are applied according to a consistent statutory definition (rateable value) throughout the UK. All assessments are due to be reviewed in April 2017 and this will inevitably produce some changes in liability above and beyond the usual inflationary increases. So, what can the hospitality sector expect in 2017-18 and, if proprietors are unhappy, what can they do about it?

If I am unhappy with my current rate liability because it is expensive, what can I do, if anything now?

Ratepayers can lodge a statutory appeal against their current rateable value at any stage before 1 April 2017. The usual grounds are that the assessment is ‘incorrect and excessive’. It is advisable to request a reduction to a nominal figure (£1) in order to give the maximum scope for a reduction in discussions with HMRC (the Valuation Office). 

Can I challenge an assessment myself?

Ratepayers can appeal themselves or can appoint an ‘agent’ to represent them on appeal. More information is available through the Valuation Officer website: www.voa.gov.uk

Are there any risks on appeal?

The assessment to rateable value is a matter of subjective opinion but based upon rental evidence, other levels of assessment and the size of the occupation. There may well be ‘risks’ on appeal particularly if there is a rent paid by the occupier or where the premises has been extended or upgraded since 2010. Ratepayers should be aware that by launching an appeal they draw the attention of the Valuation Officer to the building which he may not have looked at in detail for a number of years.

Is it possible to make savings retrospectively?

It is possible on appeal to reduce an assessment, but no earlier than 1 April 2015. Once we pass 1 April next year there will be no opportunity to reduce an assessment any earlier than 1 April 17 (the date of the new rating list) unless the Valuation Officer makes his own alteration before 1 April 2018. 

How are my actual rates payable calculated?

Basically, the local council will take the rateable value submitted by the Valuation Office (VOA) and multiply this by a ‘Uniform Business Rate’ (49.7p in most cases but subject to local supplements and some small business reliefs). In effect the rate liability now will be just under 50 per cent of the allocated rateable value. At the revaluation in 2017 the Government is committed to a ‘transitional’ scheme designed to phase in large increases and decreases in liability following a revaluation. 

What in layman's terms does the statutory definition of rateable value represent?

Rateable Value is an estimate of annual rental value were the occupation let in the open market at a fixed date (currently 1 April 2008 and at the 2017 revaluation 1 April 2015).

If I engage a surveyor what are the charges likely to be?

Charges will vary between a percentage of actual savings, or a percentage of rateable value reduction, an hourly rate or a fixed fee. Arrangements between professional advisors and their clients are regulated through the Royal Institution of Chartered Surveyors (RICS) and absolute clarity is required in order to ensure that fees are proportionate to the scale of the job undertaken or the results achieved.

Which qualifications should I look for if I decide to use a professional as my agent?

Professional advisors should carry the letters MRICS or FRICS.  

Will my rates definitely go up at the revaluation in 2017?

Not necessarily. The revaluation (2017) is supposed to ensure an ‘update of market value’. In some sectors values have fallen (between the relevant valuation dates) in keeping with local supply and demand factors. The revaluation is a chance for the VOA to take a fresh look at market rental value (at 1 April 2015).

Are there any reliefs available for struggling or start-up businesses?

There are a variety of discretionary and mandatory reliefs available from the relevant local authority designed to reflect partial use, hardship and non-profit making status. Ratepayers should make an enquiry of their local council’s finance department for more information.

Will there be any other changes expected at the 2017 revaluation?

The Government is consulting​ ratepayers, councils, industry representatives and the rating profession as to a new mechanism for appeals after 1 April 2017. The system is in three proposed stages known as ‘Check, Challenge, Appeal’. 

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