Business rates revaluation come into effect on 1 April 2023
The purpose of the revaluation is to re-base rateable values from the current valuation date of 1 April 2015 to 1 April 2021. The government’s objective is to bring the tax base up to date and to redistribute the tax to reflect changes in the real estate markets since 2015.
Both Brexit and the Covid pandemic have had a significant impact on the real estate markets during this period. Distribution and warehouse properties have soared in value as businesses reinforce their logistics and distribution capabilities in response. At the other end of the spectrum, large format retail has seen very significant falls in value. The effect is to redistribute the tax on retailers from bricks to clicks, an outcome the retail trade has been lobbying for.
In terms of the charging rules, the most significant change is the removal of “downward phasing”. This is a tax surcharge that has been levied following past revaluations on the occupiers of properties in areas where rental values have fallen. The revenue generated was used to subsidise the liabilities of occupiers in prosperous areas where rental markets have continued to rise. The removal of the collar on the allowable falls in liability is very good news for retailers. It also helps the government with its levelling-up commitments. Retaining downward phasing would have run directly contrary to the governments stated policies on levelling up.
Business rates are one of the few taxes that are based on opinion. The rateable values on which businesses will pay tax at over 50% are the opinions of value prepared by HMRC, and they’re open to challenge. The revised values are particularly interesting because the valuation date falls during a 6 week covid-related lockdown.
The appeal process is slow and complicated, but very significant savings can be achieved. In addition, the proper application of the complex relief and exemption rules can save significant amounts.
Looking ahead, the government are proposing to off-load some of the costs of business rates administration on to ratepayers. Their primary tool will be the introduction of a Duty to Notify. Ratepayers will have to tell the Valuation Office about changes to lease terms or valuation significant changes to properties within strict time limits. There will also be annual confirmation requirements. To ensure compliance, the government are proposing to levy significant fines on those that fail to notify them of the relevant changes. In terms of timing, we expect to see a soft launch of the Duty to Notify in April 2024.
It is worth discussing the implications of the revaluation and how it may affect your business with Brasier Freeth as there may well be opportunities to reduce your fixed real estate costs.
Written by guest Alan Vickery – BSc MRICS IRRV
Partner – Head of Business Rates. Alan is the Head of Business Rates at DWD and has more than 25 years’ experience in the UK business rates industry with a rounded knowledge of all sectors and expertise in complex and high value appeals.