|
|
 |
Changes are underway that will affect the rates
businesses pay in the future. New Rateable Values
will come into effect on 1 April 2005, and occupiers
will receive details of their new valuations during
October.
The Valuation Office, the government body responsible
for the valuations, proposes to send every ratepayer
a copy of the valuation on which the new rateable
value is based. It also intends to make its valuation
schemes available over the internet so that occupiers
can see how the figures have been calculated.
This may seem an admirable advancement in open
government but is it just information for information’s
sake?
Due to the complexity of the rating system, few
will have the knowledge necessary to understand
the implications of the valuations. What businesses
really need to know is how the changes will affect
the rates they pay over the next five years. |
 |
Rates are a tax on the occupation of commercial
property and in the simplest terms are based on
the rateable value, which is an estimate of its
rental value. This valuation is reviewed every
five years and the next revaluation takes effect
in April 2005. The valuations are based on the
property market two years earlier, in April 2003.
The rateable value is multiplied by the “uniform
business rate”, essentially the tax rate,
as the first stage in determining the rate bill.
At present the uniform business rate is 45.6p
for each pound of rateable value (i.e.45.6%) so
rates represent a considerable overhead for businesses.
Transitional adjustments may then be made to smooth
out changes in rate bills at the time of a revaluation.
Because value shifts between revaluations will
differ substantially according to the location
of the premises and the market sector (e.g. office,
retail, warehouse, nightclub etc.) some premises
may face increased rates and others may enjoy
a reduction in bills. To ensure that no business
faces a disproportionate increase in rates from
one year to the next the government has enacted
legislation to cap the percentage real increase
in bills from year to year. This is termed “transitional
relief”
The relief is paid for by phasing in reduced bills
in the same way, so that there is an effective
penalty imposed on occupiers who would otherwise
enjoy a large reduction in bills.
The rateable value x uniform business rate calculation
can therefore be varied on an individual basis
for each property, so without a detailed knowledge
of the transitional provisions it is impossible
for Finance Directors to budget accurately for
future liability. This is especially difficult
at the time of a Revaluation because the transitional
caps and floors are reviewed at every Revaluation.
|
|
The Government has issued a Consultation Paper
detailing its preferred transitional scheme for
2005 onwards but no final decision is likely on
the arrangements until the end of the calendar
year. Similarly it has given some initial hints
about the likely level of the uniform business
rate, but again the final figure is unlikely to
be available for some time.
Additionally the uniform business rate will, for
the first time, be subject to a number of supplementary
charges to offset reductions in the tax base through
appeals, to pay for relief to small premises,
and in some cases to pay for specific infrastructure
improvements. As a result it is becoming increasingly
difficult to predict liability beyond 31 March
2005. |
|
Members of the Royal Institution of Chartered
Surveyors and the Institute of Revenues rating
and Valuation who practice in the field of business
rates are able to advise clients on all aspects
of their rate bills. Business has become used
to employing their services in entering appeals
against valuations and assisting it in reducing
bills but a skilled business rate advisor can
assist in many other ways, including budgeting
advice and business rate validation, as well as
the more familiar cost saving role.
The past few years has seen much comment about
unqualified and unregulated rates “advisors”,
who prey on small businesses in particular and
have made many occupiers skeptical about the value
of the advice available. Businesses requiring
advice or unsure how the changes are likely to
affect them should feel confident in taking advice
from properly qualified surveyors who can help
them through the minefield and assist with budgeting
and other advice. |
|
More information soon!
|
|
|
