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Don’t forget your Business Rates

Well forget Isas and their 5th April deadline day for the moment.  The real deadline day that should be etched on the memory of all company directors, is 31st March, and the last chance to retrospectively appeal or claim against a company’s Business Rates, going back to 2005. 

By now most company directors will be aware that 1st April 2010 is the new revaluation date covering the next 5-years, when new Business Rate assessments, based on rental values, will be sent out to all commercial property occupiers.  As the calculation date for the 2010 Revaluation was April 2008 – the perceived top of the rental market – many commentators and surveyors have already announced that most commercial occupiers will see their assessments increase by up to 100 per cent before any transitional relief is taken into account based on April 2008 rental values.  On top of this there is the Business Rates Supplement levied on London occupiers with rateable values above £55,000 to pay for Crossrail.

While such big increases in Business Rates during a recession may make for good headlines, the reality is that in the first year of the 2010 Revaluation the most any occupier is likely to pay is a 20 per cent increase on their previous assessment where transitional relief is present, increasing thereafter up to their full liability in each of the next four years.

Many professionals have been advising occupiers to get their appeals in as soon as possible to the 2010 Revaluation after the 1st April 2010.  This is a prudent move and one that should be adopted by all occupiers if they think they are being overcharged.  However, what is equally important is to appeal or claim against the 2005 Revaluation and to do this an occupier must lodge an appeal to the Valuation Office Agency (VOA) before 31st March 2010.  Such an appeal may already have been made but it is still possible and quite permissible to make a retrospective claim against specific circumstances that may have materially affected your enjoyment of your premises during the past 5-years.

The reason why a retrospective claim is so important is because it is imperative for an occupier to reduce their rates bill now for the 2005 Revaluation period, if they can, because if they are able to do so, they could make the same proportionate saving over the next two to three years where transitional relief is present.  Transitional relief is a Government scheme capping exceptional increases or decreases in rates liability after Revaluation with full liability introduced in defined steps each year until full liability is reached.

Where transitional relief is present the rate liability is calculated using the rates payable in 2009/10 as the base value for calculating the relief.  Therefore, if the 2009/10 rates bill is reduced by say 10 per cent, then the rates bill in the subsequent two or three years of the 2010 Revaluation, will receive 10 per cent off their rates bills in each of these years.  Any saving on today’s rateable value will reduce the rates bill by the same percentage proportion wherever transitional relief is present, which in the west end of London office market, could be for the next three years of the 2010 Revaluation.  A significant saving considering the likely increases forecast for the 2010 Revaluation.

In the current climate the importance of cost cutting to any business is essential.  With the main office costs for any occupier being rents, rates and service charges, the opportunities for cost cutting are limited.  An occupier is contractually obliged to pay the rent agreed and whilst occupiers may moan about their service charge, ultimately it also has to be paid.  The one item an occupier can do something about is their Business Rates but only if they act fast.

An appeal or claim at this late stage is perfectly allowable and to paraphrase our MPs, ‘within the rules’.  Any appeal or claim, which incidentally costs nothing to make and can be withdrawn at anytime, can come in many guises but usually it is an appeal or claim that the occupier’s premises have generally been overvalued or that there has been a ‘material change in circumstances’ at some point during the 5-year Revaluation period.  These are more widely described by the VOA as changes that relate to the ‘physical state’ of the property or its locality.  As such, changes that are ‘physically manifest’ can be quite varied but typically relate to new building development or street works causing disturbance through noise, vibration or pollution. 

In the case of noise or vibration, and in most cities or large towns there is normally some kind of building work going on all the time, this could even include an occupier’s own refurbishment works to their own premises.

While pure economic factors, such as the recession, are not taken into account, a claim maybe made where there is an over supply of empty offices due to excess office supply and over development.  The same case can also be made for retail where there are a substantial number of empty shops on a high street.  A further example could be ‘competitor impact’ where for instance in the leisure industry, a new hotel opens near to an existing hotel and the presence of this new entrant materially affects the existing hotels trade.

Under the rules only one appeal of Business Rates is permitted per property but even if an occupier has already appealed its Business Rates in the past it maybe possible for the occupier to lodge a further appeal.  This is because an occupier could always ask its landlord to lodge the appeal on its behalf in their name.  If the occupier is the owner and freeholder of their own premises and they have already lodged an appeal in the past then they may still be able to enable a review from the VOA because the VOA is under an obligation to ‘maintain a correct list’.

Anyone wanting to make an appeal over their Business Rates should contact a member of the Rating Surveyors Association who will be able to assist you in making an appeal.  Even companies in administration may also be able to appeal their Business Rates with any savings going to creditors.

This chance for occupiers to retrospectively appeal or claim against their Business Rates is a one-off opportunity that should be grabbed with both hands.  Do not let ignorance or worrying about your Isas stop you from making real savings in this financial year.

Simon Harris is a Partner in the Rating Department of Montagu Evans LLP