commercial property lambert smith hampton

News - 16/01/2015

Business rates uncertainty puts firms 'in limbo'

Businesses are facing “a state of limbo” over business rates until the outcome of the general election, national property consultancy Lambert Smith Hampton (LSH) has warned.

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Paul Stevens, director of rating at Lambert Smith Hampton’s Bristol office, said the government’s decision to delay the revaluation process, which was due to take place at the end of March, by two years had created myriad problems.
“The delay has significant implications for ratepayers, with many in the South West now paying higher rates bills as a result,” he said.
“It will not be resolved until the outcome of the election is known in May and whichever party or parties are in power make their intentions for business rates clear.
“In the meantime, ratepayers need to be proactive to ensure that their rate liabilities are managed to keep bills to a minimum. Complexities resulting from stop-gap tinkering with the system mean that the system is now needlessly complicated and opportunities can easily be missed.”
Revaluations reflect changes in the rental market and have taken place every five years since 1990.
The last one was in 2010 and was based on values at 1 April, 2008 – the peak of the rental market, before values in many areas experienced dramatic falls.
The next revaluation was due to take place on 1 April this year and would have been based on rental levels at 1 April 2013, which would have seen ratepayers who had seen the value of their properties fall between 2008 and 2013 enjoy a reduction in rates bills.
However, businesses will not see a reduction in rates because of the revaluation delay.
The Government announced in the Autumn Statement an intention to introduce a deadline of 31 March 2015 for the submission of appeals if the resultant reductions in laibilty are to be back dated to the start of the list. Full details of this proposal are yet to be announced. It would appear that appeals will still be accepted after this date but that ratepayers will lose up to five years savings if they do not get their appeal in on time. As a result we can anticipate large numbers of protective appeals before the deadline.
“It has previously been the case that appeals right up to the end of a list can be backdated,” he explained, “but the Government appears to want to have it both ways, by extending the duration of the list to seven years but no longer accepting that corrections to excessive valuations can be backdated.
“It can only be hoped that they will perform yet another U-turn and abandon this proposal rather than risk a meltdown in the appeals system as ratepayers and their agents rush to beat the looming deadline. This is yet another example of poorly thought through tinkering that is likely to result in more problems than it solves.”
It has now been confirmed that the 2017 revaluation will be based on rental values as at 1 April, 2015. This could have an impact for Bristol businesses because a lack of new development combined with good levels of take up of “grade A” space has led to increases in prime rents which will only accelerate during 2015.
“The analysis of rental evidence for the 2017 revaluation is going to be particularly challenging,” said Paul. “Historically, most leases make provision for rent reviews in an upwards-only direction, so many businesses whose rents were set in 2008 did not see their rents fall to the market level in 2013. In some locations, there were no market transactions close to the valuation date.”
“Far from providing certainty, attempts by government to amend the rating system have increased uncertainty and resulted in increased rates liabilities for some of those worst affected by the impact of changed economic circumstances.”


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