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Tenant Services - Business Rates

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Andrews Denford & Boyd are experts in advising tenants on all aspects of business rates for commercial property. We advise a range of SME's through to some of the world's largest organisations.

We have prepared a brief outline on this topic below:

If you require professional assistance, contact gilesandrews@andrewsdenfordboyd.co.uk

Business Rates

Business rates are a property tax charged on commercial premises throughout the United Kingdom. In essence, they require the assessment by the Valuation Office of the rental value of the property (known as the Rateable Value), which is then multiplied by an annually fixed figure (the rate in the pound/uniform business rate) to arrive at the business rates payable for the rate year, which runs from 1 April to 31 March.

For example, for a commercial property with a rateable value of £100,000 the rates normally due for the year 2011-2012 will be:- £100,000 multiplied by £0.433 = £43,300.(This excludes any provision where transitional arrangements apply)

The uniform business rate is fixed by the Government and increases annually. The uniform business rate cannot be challenged. However, it is possible to appeal against the rateable value if it appears to be in excess of the rental value.

The 2010 Rating Revaluation came into effect on 1st April 2010, to replace the previous rateable values, which had been applicable since April 2005. The rateable value broadly represents the annual rent the property could have been let for on the open market on a particular date, on full repairing and insuring terms. For the current rating list, this date was set as 1 April 2008. The previous Revaluation was based upon rental values in April 2003.

There are various other methods of reducing a rates bill, depending on the circumstances. For example, partial or total relief may be given if premises are empty or if they are occupied by a charity.

Previously, most types of empty property were subject to rates at 50% of the normal charge. Recent changes to this form of rate relief, however, came into effect on 1 April 2008.

The main change has amended the Local Government Finance Act 1988, to increase the empty property rate from 50% to 100% of the basic occupied business rate, after initial void periods have elapsed. For most properties, excluding industrial, the void period is three months. For industrial properties, the void period is six months. The change is intended to encourage owners to re-let, re-develop or sell empty non-domestic buildings.

Properties owned by charities and community amateur sports clubs are not liable to empty property rates if the properties' next use is likely to be wholly or mainly for charitable purposes or for the purposes of a sports club.

Rating revaluation

Every five years, the VOA has a statutory duty to carry out a revaluation of all rateable values in England and Wales, which ensures that they reflect changes in the property market. The next revaluation is due to come into effect on 1 April 2015 and all properties will have their rateable value assessed on the valuation date of 1 April 2013. The values will remain effective for five years, unless changes to the property require a new assessment to be made, which affects the rateable value.

It is likely that, as for the last revaluation, transitional relief will be available to limit any dramatic increases and decreases in rates payable when compared to the previous year.

To appeal or not to appeal

Under the current 2010 Revaluation there is no time limit on appeals, so they can be made any time up to 31 March 2015 and backdated to 1 April 2010. However, no appeals should be made without carefully considering whether the new assessment is too high or correct, as if it is low, the Rateable Value may be increased on appeal. Equally, the impact of Transitional Provisions may mean that there will not be a saving if the premises are going to be vacated whilst the Transitional Provisions are still in effect.

If an appeal is successful and the Rateable Value is reduced, it may not always guarantee a lower rates bill immediately because of the Transitional Provisions. However, it is important to note that many Rateable Values agreed during the 2010 Revaluation may continue to influence the rates payable well beyond April 2015, when the next revaluation is expected.

Scotland

The business rates system in Scotland is similar, but not identical to the system in England.

IMPORTANT DISCLAIMER
This briefing merely highlights some of the key issues involved. However, each property needs to be considered individually because of the complex nature of rating legislation. It is impractical for a bulletin of this length to be all encompassing and it is important that the contents of this leaflet are not relied upon for any specific circumstance. It is always important to seek specific professional advice. Andrews Denford & Boyd cannot be liable for any loss or damage arising in any way from the contents of this document.

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