13 / 36
There are also quite wide variances within London. For
example within Mayfair and the City, with micro-locations
in each sub-market showing quite large variances in
Rateable Value change.
This is reflective of the characteristics of the central
London retail market where the street address and
prominence are so significant, and turning the street
corner can see a sharp drop off in rental value.
London ratepayers suffer from the double impact of
having both large underlying rental growth, and also being
typically classified as ‘large’ (RV > £100,000) buildings,
which means that they don’t benefit from transitional relief
to the extent that smaller buildings do.
Transitional relief, tweaked slightly in the recent Autumn
Statement, is designed to taper the effect of the increase
over a few years. However, as shown in the table above,
with uplifts for large properties capped at 42% in Year 1,
and 32% in Year 2, only those with exceptional growth will
have more than two years’ worth of transitional relief.
The Uniform Business Rate (UBR) used to multiply
Rateable Values to arrive at the Business Rates payable
will be reduced next year to 47.9p in the pound (currently
49.7p), to some extent counterbalancing Rateable Value
increases. However, a third sting in the tail for London are
the supplements of 2 pence for Crossrail and 0.5 pence in
the City of London for the special security measures, both
of which are added to the UBR as appropriate and are not
limited by transition.
Impacts
will be most
notably felt
in boom and
regen areas
Whilst overall average rates changes in some areas can
appear modest, these averages do hide some real shocks,
and ratepayers will be keen to contest assessments
after the 1st April 2017. However the Government is also
introducing a new system known as Check Challenge
Appeal (CAA), which is a more complicated and costly
process, that the Government, by its own admission, have
introduced to reduce the number of appeals. Of most
concern, is the fact that in the Draft Regulations for CCA,
the Government is proposing to “blunt” the judicial powers
of the Valuation Tribunal (VT). The proposals will only
allow the VT to make a decision to alter an entry in the
Rating List if they are satisfied that the Valuation Officer
has acted outside the realms of reasonable professional
judgement, and whilst this has not been defined, it could
be interpreted as being +/- 10% or even more.
This could mean, for the largest rating assessments
in central London, ratepayers could be paying several
million pounds more in rates over the five year period
of the Rating List than is justifiable. This would make
business rates unique as a tax where the taxpayer could
be overtaxed by 10% or more with no ability to have the
assessment changed.
We await with interest the actual operation of CCA
in practice.
FINAL: TRANSITIONAL ARRANGEMENTS 2017 REVALUATION (BEFORE INFLATION) FUNDED BY 3 CAPS ON REDUCTIONS
Property Size
2017/18
2018/19
2019/20
2020/21
2021/22
Upwards Cap
Small
5.0%
7.5%
10.0%
15.0%
15.0%
Medium
12.5%
17.5%
20.0%
25.0%
25.0%
Large
42.0%
32.0%
49.0%
16.0%
6.0%
Downwards Cap
69%
20.0%
30.0%
35.0%
55.0%
55.0%
61%
10.0%
15.0%
20.0%
25.0%
25.0%
29%
4.1%
4.6%
5.9%
5.8%
4.8%
Note: these are year on year caps on increases. For instance, the maximum increase for small properties over 5 years would be 64%.
But a small property with an increase of 7% would reach their full bill in year 2. Medium is above £28,000 rateable value in London
and £20,000 elsewhere. Large above £100,000.
CUSHMAN & WAKEFIELD
13
SPOTLIGHT ON...