Many football clubs are paying a heavy price for their high profile thanks to an unfair business rates system. Paul Nash, Director of Business Rates, explains.
Football stadia rateable values double following 2010 revaluation
Business rates are calculated by reference to a ‘rateable value’ which is multiplied by a ‘Uniform Business Rate’ multiplier set annually by the Government. Following a general revaluation in 2010, the rateable value of football stadia has doubled on average. While the property market has deteriorated generally, it seems the glossy image of football, as portrayed by the media, has coloured recent assessments made by the Valuation Office Agency (VOA) – a department of HMRC.
The rating list containing rateable values is usually updated every five years and, in April 2010, football stadia seemed to suffer more than any other class of commercial property through the revaluation made by the VOA. The average rateable value increase for stadiums in 2010 was 104% and some football clubs experienced an increase as high as 270%.
Reassessment based on 'guess work'
What adds insult to financial injury is that the reassessment was based on a purely hypothetical estimate of a stadium’s rental value at 2008 values, so essentially it was guess-work and not designed to be linked to the trading success of a particular club.
Few clubs actually run at a profit
While football is seen as a very high profile and glamorous industry, not every club has a high enough income to employ a Ronaldo or a Beckham. Very few clubs actually run at a profit, and most outside of the Premiership struggle to make ends meet. The lack of any profit does not however exempt clubs from paying business rates under the rating hypothesis.
Rating revaluations are scheduled to take place every five years in order to ensure that business rates are based on the most up to date information possible. However, at the end of last year, the Government announced that it was postponing the 2015 revaluation until 2017. This decision means that by the time revaluation actually occurs, businesses will have been paying rates based on pre-recession rental levels for seven years.
Deferred revaluation could have serious consequences
Football clubs that are unhappy with their current rating levels can initiate a statutory appeal, however the process is increasingly slow and the VOA has been beset by a lack of resource. Clubs are being placed in a frustrating and impossible position. On the one hand, the appeal process that is available is very slow, and on the other, if a club chooses to wait until the next revaluation, relief is still four years away. This could have serious consequences for those clubs, like Wigan Athletic, who have suffered relegation in 2013.
Backdated refunds provide light at the end of the tunnel
If a club is persistent enough to pursue an appeal, there is light at the end of the tunnel. A reduction this year in rateable value would not only reduce costs going forward, but would also produce cash refunds as far back as 2010. However, as matters stand, both Premiership and Football League clubs are very concerned about the fairness, transparency and correctness of rates as a form of taxation.