Hands up if you know your company’s business rates are about to rise, and your chances to appeal are going to fall. Is this part of the 2017 revaluation? No, this is on top of any increase because of that. The UK Supreme Court has made a ruling that overturns a 60-year-old way of assessing property values.
Previously, businesses that occupied more than one floor in a building with other tenants had their space assessed as a single unit. Landlords would generally offer a quantum or bulk discount of up to 15% off the rents and that would be reflected in the business rates. The more space taken, the more cost effective it became. Until now.
The Supreme Court – in the Mazars’ Ruling – has decided that, to reach other floors of an occupancy, staff had to leave the tenant’s area to use communal lifts or stairs before re-entering the tenant’s area. Thus, each floor should be treated as its own ‘hereditament’ and assessed individually for business rates. Quantum discounts are no longer taken into account.
But there’s more. There are some 280,000 business rates appeals being assessed currently by the Valuation Office Agency (VOA). Any of these appeals that were based on the old system will need to be withdrawn and resubmitted reflecting this new decision about what constitutes a hereditament.
However, the chancellor has capped appeals, ruling that newly submitted ones can only go back to 1 April 2015. Original appeals could have stretched back as far as 2010. The delay in considering them was due to the under-capacity, workload and poor government funding of the VOA, and no fault of the companies themselves. Now, a claim for several years has to be replaced by one for several months only.
Thankfully, in a remarkable U-turn within the past month, the VOA has decided that appeals already in the system can remain rather than its previous ruling that they had to be withdrawn and resubmitted… for the shorter period only. I reckon some 20,000 business rates payers will be affected by this situation – around 8% of the 280,000 outstanding claims – now allowing companies their legitimate right to still appeal back to the start of the current valuation.
The ruling plus the chancellor’s cap on the time period for appeals is a serious double whammy and a scandalous whitewash. It unfairly favours the VOA and will cost companies a lot of money. It also gives cash-strapped local authorities a way to milk hard-pressed businesses without any change to their circumstances.
John Webber is head of rating at Colliers International