New business rates set to cause problems

1 April 2010

NB Real Estate, part of Capita Symonds, warns that the new business rates, taking take effect today, could see the biggest fall in bills limited to just 4.6% for large properties - despite rateable values having fallen by much more.

The 4.6% floor means that for many properties rates bills will not reflect the recent slump in property values encountered by many business owners. However, rates bills can go up by as much as 12.5%.
A commercial property with a rateable value that has fallen by 40%, for example, will only see its bills decrease by a maximum of 4.6% this year. This is due to the Government’s special transitional arrangements, which will phase in significant increases or decreases in business rates bills over the next five years .

John Powell, Ratings Expert and Director at NB Real Estate, says: “Businesses have gone through exceptional hardship in the last two years and many will find it terribly unfair that their rating bills can only go down by 4.6% even if the value of their property has fallen by much more than that.”

The current rating system is causing many other issues for businesses, for example, the complexity of rating bills and the difficulty in appealing against business rates.

Powell says: “Many business rates bills are so obscure that it is almost impossible to understand even for an intelligent Finance Director. It is also not rare to find inaccurate information or miscalculations in the bills, which are extremely difficult to challenge.”

The Valuation Office Agency, which is responsible for determining the rateable values, also makes it difficult to appeal against business rates. For example, failure to fill in the appeal form properly will see the case rejected straightaway.

Comments John Powell: “This can have serious repercussions for businesses as they cannot appeal more than once for the same reason.”

Powell also says that in addition, tenants can only appeal for a rate reduction when a ‘physical’ change has occurred in the area where the property is based. This could be the construction of a big shopping mall near a property, building work in the next-door property to local retailers or the split/merger of a property. The deterioration of the economy, for example, cannot be used as a ground for appeal.

The new legislation means that businesses outside London may also be charged a supplement on top of their business rates. So far, the only supplement charged has been to support the Crossrail project in London.

For more information on Business Rates visit Business Link's website.

1 Properties with rateable values above £25,500 in Greater London or £18,000 elsewhere