Major landmarks left reeling by massive business rates rises
Country’s best-known buildings face business rates increases of up to 264%
Publication of new valuations reveals bills for five years from April 2017
Jerry Schurder: “The business rate has reached unacceptable and unsustainable levels”
Many of England’s best-known landmarks, offices, shops, attractions and infrastructure are facing massive rises in their business rates bills from April 2017 on wards following the publication of updated valuations.
The Valuation Office Agency (VOA) has today released details of new rateable values – from which business rates bills are calculated – allocated to each of England’s 1.85 million commercial properties. This latest revaluation will be the first since 2010.
Analysis by business rates experts at property consultancy Gerald Eve has revealed the extent of the valuation rises being faced by some of the country’s most-prominent properties, with the worst-hit including:
- Huge rises for London attractions: The O2 (142%), Tower of London (90%) and London Eye (70%)
- Leicester City paying the price for Premiership success with 264% increase at King Power Stadium
- Dorchester Hotel sees 54% surge, The Ritz 36%
- West End retailers Harrods, Hamleys, John Lewis and Selfridges all facing increases over 50%
- Channel Tunnel rail link on track for 77% surge
- Cricket grounds hit for six: Edgbaston (117% rise), Lord’s Cricket Ground (67%)
- Bank of England in need of cash to meet 61% uplift; BBC’s Broadcasting House up 16%
- Offices in The Shard rise 45%, Docklands offices of HSBC up 10%
- The Queen’s Buckingham Palace up 13%
Jerry Schurder, head of business rates at Gerald Eve, said: “The publication of these latest values puts into sharp focus just how punitive business rates, the highest local property tax in the world, can be. But it is not just a question of the overall burden being far too high – the sudden jump that many are now facing with only six months’ warning could lead to job losses and property disposal in an attempt to mitigate occupation costs. For these firms, whose values have doubled or even trebled, it is clear that the business rate has reached unacceptable and unsustainable levels.”
Analysis has also shown some interesting quirks, with similar properties facing different fates:
- Heathrow Airport – the country’s single-biggest assessment – falls 13%, while Gatwick rises 6.7%
- Dorchester Hotel rises 54%, far greater than Grosvenor House (20%) and Park Lane Hilton (16%)
- Arsenal’s Emirates Ground drops 7% while Wembley (+14.2%) and Olympic Park (+15%) rise. All are blown out of the water by the 264% increase faced by Leicester City’s King Power Stadium
- London Mayor’s City Hall sees a 26% increase, while the Houses of Parliament stay exactly the same
Gerald Eve’s examination of the 2017 rateable values has identified revaluation winners as well as losers. The revaluation is designed to redistribute the overall business rates take, so that those firms in the locations which have prospered since the last revaluation shoulder more of the burden, but those which have under-performed and whose property values have fallen pay less. ‘Winners’ from the revaluation include:
- High Street retailers across the Midlands and the North, with falls of up to 56% in Bolton, Oldham and Rochdale
- Didcot power station (down 60%), Sellafield (down 27%) and Wylfa power station (down 71%)
Jerry Schurder continued: “The new rateable values highlight the huge disparities between locations that have weathered the effects of the recession and those that have struggled to reverse the decline, but also underline what a mistake it was to postpone the revaluation by two years. Firms in the worst-affected areas should have benefited from lower bills 18 months ago rather than having to wait until next April.
“More than anything, the extreme volatility in rates bills that will hit firms in April underlines the need for revaluations to be undertaken far more frequently so that bills respond quickly to market changes.
The impact of the revaluation is magnified by the Government’s controversial transitional business rates relief proposals, under which larger properties whose values have fallen will see bills reduce by just 4.1% in the first year: for example, Superdrug on Deansgate in Bolton should see its liability fall from £141,645 currently to £73,440, but under the transitional arrangements will have to pay £136,919 during 2017/18.
Worse, the structure of the preferred transitional arrangements means that some firms will never see the full benefit of their decreased valuations. With reductions phased in on such a shallow trajectory, large properties such as the aforementioned Superdrug will never actually realise the full decrease during the revaluation period.
Jerry Schurder said: “That the most-struggling companies in the hardest-hit locations will never see the full benefit of their reduced assessments makes a mockery of the Government’s approach to revaluations. What is the point of revaluing properties if retailers are unable to see the upside? It is yet another example of a confused thinking on the part of the Government and indicative of an attitude that asks retailers to “pay up and shut up”.
The reason why decreases are phased in is to compensate Government for the protection it grants to those facing increases in bills; under the Government’s preferred arrangements, any rises facing large firms are ‘limited’ to 45% (compared to a maximum of 12.5% under current scheme).
Jerry Schurder added: “The last revaluation – based on values in April 2008, pre-recession and in a very different economic climate – came into effect in 2010 which, combined with the postponement of the 2015 revaluation, means that the most-struggling firms will have been waiting seven years to see falls in their bills.
“However, the transitional arrangements mean that rather than receiving the reductions straight away, bills will reduce by only 4.1% next year for larger properties and they will have to wait up five years to feel the full benefit, which for many will be far too late. Businesses in the hard-pressed industrial heartlands have been crying out for reduced rates bills for seven years now since the last revaluation, and at the point at which they finally see light at the end of the tunnel, the Government whips the carpet from under their feet.
“Nobody is claiming that phasing in the largest increases to help firms address sudden increases is a bad idea, but it is madness that this protection is paid for by denying full and immediate reductions to those in greatest need of them. The costs of phased increases should be paid for by Government – not by those companies in desperate need of reduced bills – or even better, the system should be reformed to reduce the overall burden and make revaluations more frequent so that such volatility is minimised.”
Record-high tax rate
The Government has also announced that in order to ensure the same £25bn revenue is raised from business rates after the 2017 revaluation, the uniform business rate (UBR), which is used to calculate rates bills, will be 46.7 pence per pound of rateable value for smaller properties, with larger buildings facing an additional supplement of 1.3p.
Jerry Schurder added: “Never before has the UBR exceeded 43.2p in a revaluation year and a tax rate some 8% higher at 46.7p (11% higher for large properties) – which will grow each year in line with inflation – shows how unacceptable and unsustainable the business rate has become. For years now, and especially since the Government postponed the revaluation planned for 2015, UK plc has issued a clarion call for a reduced rates burden, which continues to fall on deaf ears with businesses being treated as a cash cow to make up for cuts in local government funding.”