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The Valuation Office Agency (VO) of HMRC assesses the rateable value of all relevant properties in England and Wales. Every 5 years since 1990 the VO has published a new “rating list” for each billing authority, which shows the rateable values of all properties in its area. It includes the address and description of each property as well as the date from which any alteration to the rating assessment takes effect. The rating list can be seen at the office of the local VO (and viewed online at www.2010.voa.gov.uk/rli/) and a copy is also available at the offices of the billing authority.
Most business premises are assessed for rates and have a rateable value. Living accommodation is generally treated as domestic property and is subject to the council tax instead. In some cases, business premises and living accommodation are in the same property and occupied by the same person. In these cases the property is known as a “composite”. Typical examples of composite properties are a shop with living accommodation or a factory with a caretaker’s house or flat. In these cases, special rules apply. The general principle is that business rates are payable on the business accommodation and council tax is payable on the living accommodation. Apart from living accommodation, there are several types of property that are exempt from business rates, including agricultural land and buildings, fish farms and most churches.
There are two main factors: the rateable value of the property and the level of the uniform business rate (UBR), which is expressed as a fraction of a pound. Multiply the one by the other and in theory you would have the annual amount of business rates. But there is a complication because increases (or decreases) in business rates may be phased in over a period and the amount actually payable could therefore be below or above the figure the simple multiplication produces. These “transitional arrangements” are mentioned later.
The rateable value of a property is broadly its open market rental value – assuming the tenant insures the premises and carries out all the repairs. There is a fixed date at which the rental value is assessed which is usually two years before each rating list comes into force. The most recent revaluation was effective from 1st April 2010. It follows, therefore, that rental values are taken at market conditions prevailing at 1st April 2008. Although the rating valuation is based on the rental value as at 1st April 2008, the physical state of the property and its locality is considered as at 1st April 2010 or at the date of any subsequent alterations. Rating valuations normally take place countrywide every five years. The rateable value of a property will therefore usually change every five years. It will also change if the ratepayer lodges a successful appeal or if its value is affected between revaluations due to physical changes to the property or its locality. The Governments in England, Scotland and Wales have postponed the 2015 revaluation until 2017.
The UBR is the multiplier that is applied to the rateable value to calculate the rates due. Each year, except in the year of a rating revaluation, the UBR increases in line with inflation.
For the rating year 2015/16, which runs from 1 April to 31 March, the UBR is £0.493 in England. Thus, if you occupy premises in England with a 2010 rateable value of £50,000, you calculate your theoretical business rates liability as follows: £50,000 x £0.493 = rates payable of £24,650. Since 2012/13, occupied properties in England with a rateable value below £18,000 (below £25,500 in London) have their rates bill calculated using a lower UBR which, for 2015/16, is £0.48.
But this is not necessarily the end of the story. The amount payable may be affected by a phasing scheme known as “transitional arrangements”, which is designed to spread the impact of a large increase (or decrease) in business rates following the five yearly revaluations and your rates bill may also be affected by one or more supplements or reliefs.
Download our Business Rates App for more information about these.
You will receive a rate demand from the appropriate billing authority around the 1st April each year. Normally you will pay in ten equal monthly instalments but from 2014/15 you can apply to pay by 12 equal instalments. If the property is newly built or the rateable value of an existing property is altered during the rate year, you will receive an amended demand requesting payment for each remaining monthly instalment. Business rates are payable by the occupier of the property. If you are a tenant, the lease will sometimes state that your rent is inclusive of rates. In this case your landlord may take responsibility for the payments. Where the property is empty, it is the person entitled to possession of the property who is liable. Depending on the circumstances, this could be the freeholder, the leaseholder or some other person.
In Scotland, instead of the Valuation Office Agency, there are 14 independent Assessors whose responsibility it is to assess the rateable values of all properties and to maintain the Valuation Roll. Assessments can be viewed online at www.saa.gov.uk. Local Government Finance is a devolved subject under the control of the Scottish Parliament but the rating system is similar to that in England and Wales. In recent years the Scottish UBR has been harmonised with that in England at the same level. Ratepayers whose aggregate assessments in Scotland are £18,000 or less qualify for a Small Business Bonus Scheme. Historically Scotland has had its own legal system and, while in recent years new legislation has mirrored that of England and Wales, there still remain fundamental differences in rating matters. It is important therefore that your Scottish rating advisors are experienced in these matters and Gerald Eve’s Glasgow office would be happy to advise you on any rating matter in Scotland.
Occupiers, owners and their agents may lodge an appeal against their rateable value. This is usually referred to as “making a proposal to alter the rating list”. The appeal is sent to the local valuation officer and may normally be made at any time. However, certain appeals have to be made within fixed time limits. We recommend that you should consult us about your business rates liability at an early stage. We will help you to decide whether it is worth challenging your rateable value. You may appeal against your rateable value on a range of grounds. For example:
- the rateable value is incorrect
- an assessment alteration made by the Valuation Officer is incorrect
- there has been a material change in circumstances. Perhaps a building has been demolished, or there have been changes to the locality which affect the value of the premises in question.