BUSINESS RATES A CHANGING AND CHALLENGING LANDSCAPE JERRY SCHURDER FRICS FIRRV HEAD OF BUSINESS RATES, GERALD EVE LLP

THE EXCITING WORLD OF BUSINESS RATES

BUSINESS RATES IN THE NEWS

GOVERNMENT REVIEWS OF BUSINESS RATES

Small Business Rate Relief – permanent from 2017

Removes 600,000 properties with RVs < £12,000

Annual UBR increases to be linked to CPI instead

of RPI - starting in 2020

More frequent rating revaluations

REVIEW OF BUSINESS RATES STRUCTURE

OUTCOME

Source: OECD Revenue Statistics 2016

RECURRENT PROPERTY TAXES AS % OF GDP

UK BUSINESS RATES: AN INTERNATIONAL PERSPECTIVE

ARE BUSINESS RATES FIT FOR PURPOSE? RATES REVENUE AND RETAIL SALES SINCE 1990 INDEX (BASE YEAR 1990)

Rates (local lists)

Total Retail Sales (Source:

British Retail Consortium)

ARE BUSINESS RATES FIT FOR PURPOSE? RATES REVENUE AND RETAIL SALES SINCE 1990 INDEX (BASE YEAR 1990)

Rates (local lists)

Total Retail Sales (Source: British Retail Consortium)

Total Retail Sales excluding online (Source: BRC)

• Largest increases phased in over a number of years

• Historically no year 1 increase > 12.5%

2017 RATING REVALUATION TRANSITIONAL ARRANGEMENTS

Property Size 2017/18 2018/19 2019/20 2020/21 2021/22

Upwards

Cap

Small 5.0% 7.5% 10.0% 15.0% 15.0%

Medium 12.5% 17.5% 20.0% 25.0% 25.0%

Large 42.0% 32.0% 49.0% 16.0% 5.0%

Small RV < £20,001 (<£28,001 in London)

Medium RV between £20,001 (£28,001) and £100,000

Large RV > £100,000

Downwards

Cap

Small 20.0% 30.0% 35.0% 55.0% 55.0%

Medium 10.0% 15.0% 20.0% 25.0% 25.0%

Large 4.1% 4.6% 5.9% 5.8% 4.8%

2017 RATING REVALUATION TRANSITIONAL ARRANGEMENTS

2010 RV £275,000

2017 RV £123,000

Rates liability If no transition

2016/17 £136,675

2017/18 £58,917

2018/19 £61,131

2019/20 £63,222

2020/21 £64,452

2021/22 £65,682

£313,404

With transition penalty

£136,675

£124,994

£120,161

£116,728

£623,210

£131,795

£129,532

TRANSITIONAL ARRANGEMENTS IMPACT ON THOSE FACING LARGE DECREASES E.G SUPERDRUG, CANTERBURY

REFORM OF APPEALS

• 2010 Revaluation – 1,089,700 appeals to 31 Dec 2017

• 158,810 outstanding

• ‘72% of appeals lead to no change in rateable value’

REFORM OF APPEALS SYSTEM IN ENGLAND CHECK, CHALLENGE, APPEAL

“The case for bringing forward the release of information is clear”

“The taxpayer should have access to relevant information on what his taxes are based”

“Many appeals would be avoided if the VOA more freely shared evidence with ratepayers”

REFORM OF APPEALS SYSTEM: THE BUSINESS VIEW CHECK, CHALLENGE, APPEAL

CHECK STAGE

• Confirm physical details VOA holds about property

• Correct inaccurate data and provide missing information

• Fines for false information provided ‘knowingly, recklessly

or carelessly’

REFORM OF APPEALS SYSTEM CHECK, CHALLENGE, APPEAL

CHECK STAGE

• 12 months to conclude Check

• VO will amend assessment to reflect agreed facts (up as

well as down) but will not negotiate the valuation basis

CHECK, CHALLENGE, APPEAL

REFORM OF APPEALS SYSTEM

CHALLENGE STAGE

• Complete challenge within 4 months of end of Check

• Must provide alternative valuation

• Including all rental evidence, argument and case law

• Limited opportunity to introduce evidence subsequently

CHECK, CHALLENGE, APPEAL

REFORM OF APPEALS SYSTEM

APPEAL STAGE

• 18 months allowed to agree

• VO issues decision notice with explanation

• Decision, or absence of one, can be appealed to Valuation Tribunal

within 4 months of decision

• Fee up to £300 – refundable if successful

REFORM OF APPEALS SYSTEM CHECK, CHALLENGE, APPEAL

THE PROCESS

• Intended to be entirely online

• Using Government Gateway

• Ratepayer has to validate his interest in each property – individually

• Software still only in Beta mode

• And not available at all for many property types

CHECK, CHALLENGE, APPEAL

REFORM OF APPEALS SYSTEM

REFORM OF APPEALS SYSTEM CHECK, CHALLENGE, APPEAL

REFORM OF APPEALS SYSTEM CHECK, CHALLENGE, APPEAL

CHECK, CHALLENGE, APPEAL

REFORM OF APPEALS SYSTEM

CHECK, CHALLENGE, APPEAL

REFORM OF APPEALS SYSTEM

• Next revaluation brought forward to 1 April 2021

• Antecedent Valuation Date will be 1 April 2019

• Major resource issues at VOA need resolving for

more frequent revaluations to be deliverable

• And it seems to have an attitude problem too –

defending the indefensible

BUSINESS RATES A CHANGING AND CHALLENGING LANDSCAPE MY THOUGHTS

BUSINESS RATES A CHANGING AND CHALLENGING LANDSCAPE MY THOUGHTS

• Are 3 yearly revaluations sufficient?

• Retail, casual dining and leisure sectors moving faster than ever

• 2017 revaluation already out of date

• Gap between AVD and revaluation needs to be reduced to 1 year

• Should have ambition for annual revaluations

• This requires formal lease registration and a transparent VOA

BUSINESS RATES A CHANGING AND CHALLENGING LANDSCAPE MY THOUGHTS

• Reducing the burden

• Rates receipts should rise and fall in line with property values

• UBR needs reducing to a ‘fair level’

• Retailers should lobby for change:

• Bricks vs clicks

• Revenue from digital tax used to reduce UBR for retail

• Resources for VOA

• A fair and transparent appeals system

jschurder@geraldeve.com

Tel. 020 7333 6324

07836 573750

@JerrySchurder

Jerry Schurder FRICS FIRRV

Head of Business Rates

Gerald Eve LLP

72 Welbeck Street

London

W1G 0AY

BUSINESS RATES A CHANGING AND CHALLENGING LANDSCAPE CONTACT DETAILS