Business rates- what do they mean for businesses in Greater Birmingham?
July 2023
What are business rates?
Introduction
The Greater Birmingham Chambers of Commerce (GBCC) have partnered with Colliers International to produce a clear guide on the business rates system in England and what it means for your business. In this paper, you will find details on:
• The rating system
• The rating list
• An explanation of the appeals process
• A breakdown of the different types of appeal
• Material change in circumstances
• Reliefs and payments
• The changes to the system the GBCC is calling for in order to make the process more efficient and cost effective for businesses
• How businesses can secure support and guidance on the business rates system
Business Rates - definition
Business rates are a local tax paid by occupiers of non-domestic property. Business properties on which it is charged include the likes of shops, offices, pubs, warehouses and factories.
What is the rating system?
Under the UK Rating System annual liability for Business Rates is calculated using the formula –Rateable Value (RV) x Uniform Business Rates (UBR). The rate year runs from 1 April to 31 March.
• A rateable value is an estimate of what it would cost to rent a property for a year, on a set valuation date. Rateable Values for a number of property types are valued on a comparable basis for Rating purposes. This means that we are looking at the rental value of the property as if it was vacant as to let on the open market, on one particular valuation date. For England this is 1st April 2021. Rateable Values are calculated for all commercial properties by the Government’s valuers known as the Valuation Office Agency (VOA) in England and Wales. The VOA insert RVs into a Rating List.
• Uniform Business Rates is a local tax in the UK paid by businesses, based on local valuation of what their premises and a rate fixed by the VOA that applies across the country. It is important to note that this is an amount set at the start of a rate year. The Government can only increase the level of the uniform business rate in line with the annual change in inflation between September and September each year.
• The current multiplier for large properties (RV above £51,000) is 0.512p/£ in England, so this is the amount by which the RV is multiplied to create the annual rates charge. The multiplier for properties with lower RVs is 0.499p/£
What is the rating list?
It shows all properties in the area, their rateable values, and their descriptions.
The VOA undertakes revaluations of all business premises every few years commencing from 1 April. All properties are valued as if they existed on the same valuation date for each Rating List. The valuation date is two years before the list comes into force, but this varies depending on the country. The English and Welsh systems will be identical going forward.
How does the appeals process work?
If you have any reason to believe your rateable value is not correct you can appeal against the VOA's revised rateable value for your property. Colliers are happy to advise local firms, to carry out valuations to ascertain whether their RVs are too high. The process for this will be as follows:
• Estimated valuation carried out by Colliers’ surveyors, using rental information provided by franchisee. If an appeal is appropriate, proceed to next stage.
• Inspection carried out.
• Check submitted by Colliers to either confirm or amend the factual details. The Valuation Office Agency response time on this is up to 12 months.
• If necessary and not resolved at Check stage, a Challenge is submitted by Colliers within 4 months after closure of Check.
• The Challenge contains a full valuation. VOA response time is up to 18 months.
• If the response to the Challenge is not the desired outcome, Colliers may advise submitting a proposal to the Tribunal, which costs £150-£300 per application, but this will not be done without further discussion and advice.
What kinds of business rates appeals are there?
There are 4 types of business rates appeals:
• Rateable value
Rateable values are used to work out how much you pay in non-domestic rates. They are set by the Valuation Office Agency. If you are unhappy with their decision not to change your rateable value, you may be able to appeal.
• Completion Notice
Completion notices are sent by your local council. They specify the date a new or altered property should appear in the rating list from. If you believe the date used is wrong, you may be able to appeal.
• Penalty Notice
The Valuation Office Agency can issue penalties if you don’t give them information they’ve asked for or give them false or misleading information. If you have received a penalty notice and believe it was issued incorrectly, you may be able to appeal.
• Transitional Certificate
The Valuation Office Agency issues transitional certificates. If you believe the certificate is showing an incorrect rateable value, you may be able to appeal.
What else can Colliers provide assistance with?
Material Change in Circumstances Appeals
Appeals can also be made where there have been physical changes in the locality that have impacted on trade. Such factors include:
• New competition opening in the locality
• Refurbishment or alterations to existing competition
• Infrastructure or transport changes
• Physical changes to the actual property
• Closure of businesses in the locality that were major employers
• Temporary or permanent disruption due to a nearby redevelopment Reliefs and Payments
There are number of fiscal reliefs available to businesses to aid with the costs they are facing from business rates.
• Retail, Leisure, and Hospitality Relief
This relief is available for all premises being used as a Restaurant, Café, Bar and Pub and eligible companies can claim up to 75% off their business rates bill and up to a cap of £110,000 per business. There is no such deadline for the RHL applications as they relate to the current rate year.
• Small Business Rate Relief
Businesses that qualify for Small Business Rates Relief (SBRR) also have the benefit of using the small (i.e. lower) business multiplier used for liability calculations. A business may apply for SBRR if the aggregate of the Rateable Values (RVs) of its properties is less than £20,000. Relief is 100% below £12,000 rateable value and on a sliding slide between £12,001 and £14,999.
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Transitional arrangements
When a new Rating List comes into effect, it can result in substantial changes to the RV dependent on what has happened with the rental market over the preceding revaluation period. In order to cushion the effect of large increases the Government introduced a system of caps on increases and to pay for those limits on reductions. These percentages differ throughout the UK, for different sized properties. Colliers can advise further on this. The upwards transition calculations are as shown below:
What is the GBCC calling for?
For a number of years, the GBCC has worked closely with Colliers and counterparts at the British Chambers of Commerce to press ahead with much needed reform of the business rates system. Whilst the GBCC recognise that a number of promising announcements were made at the 2022 Autumn Statement (particularly in relation to the freezing of the multiplier and removal of downwards transition), more needs to be done in order to tackle the inherent flaws that remain in the system. Examples include:
Lack of Transparency from the VOA (Valuation Office Agency) and an Unfriendly and Ill-Equipped Appeal System
The valuation process that allocates shops their rateable values is not transparent. This is because the valuation office agency does not share the evidence that it uses to form the basis of its valuations. The only way business occupiers not happy with their rateable values can access this
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evidence is by challenging the valuation through the “check challenge appeal” system (CCA), a lengthy and costly process for the occupier.
Business rates appeal figures announced in May revealed that the business rates system and in particular, CCA, the “new” Check Challenge Appeal Business Rates Appeals System, clearly isn’t working. According to government statistics 845,670 Checks (the first part of the appeal process) were registered over the six years of the 2017 list (1 April 2017 to 31 March 2023) with 132,690 or 16 per cent of these registered in the last quarter (Jan 1st to March 31st 2023) of the list alone- as businesses rushed to beat the deadline, with the 2017 rating list coming to an end.
The GBCC is therefore calling on the Government to restructure and examine the procedure of the VOA. Primarily we want acknowledgment from Government that the Check Challenge Appeal Business Rates Appeals System needs to be reviews and there needs to be greater transparency around how the business rates bills are calculated.
Rogue Rating System
The upheaval caused by the closing of the 2017 List at the end of March 2023 and the new 2023 Rating Revaluation from 1 April has increased the number of rogue agents who claim they can help businesses.
The latest revaluation has created a two-tier system between those owners and occupiers who either themselves or via agents made representations to the VOA during the assessment process and who appear to have been more successful in negotiating lower and more correct values - and those that didn’t.
This means some of the smaller businesses in market towns across the UK may not be seeing the reductions in their rate bills that they should be in the Revaluation on 1 April, making them vulnerable to approaches by rogue rating surveyors who promise they will help them negotiate the new Rating Revaluation, but who often just take up front fees, then fail to deliver and disappear without trace.
The GBCC recognises that unhappiness with rates assessments and a complicated process of dealing with appeals system will drive more smaller businesses into the arms of rogue rating agents who promise to negotiate lower bills, so this needs to be examined. However, the GBCC recognises that to tackle this the Government needs to regulate the system so that the Royal Institution of Chartered Surveyors introduces a list of registered rating advisors.
The Multiplier
The GBCC views that the multiplier, which is used to calculate the according business rates, is unsustainably high. It was therefore reassuring to see that the Multiplier had been frozen at the last Autumn Statement; however, further reforms are required in order to alleviate the cost pressures many businesses are facing and free up cash to allow firms to invest and grow their business.
Nowhere else in Europe do businesses pay half the rental value of premises in property taxes.
It may have been frozen at 51.2 p and 49.9 p (for small businesses) for 2023-4, but this is the first time a new list has started with a multiplier over 50p- which means as time moves on and the multiplier rises with inflation this figure will continue to increase.
The Annual Cycle
The GBCC is advocating for a move to an annual revaluation cycle. The Government has moved from five-yearly revaluations to three-yearly revaluations. By implementing yearly revaluations, business rates bills will accurately reflect the dynamic movements of the market and allow occupiers to benefit immediately from adjustments to rateable values. Whilst the revaluation process remains at a 3-year cycle, the government should continue to provide additional ‘transitional’ relief to cushion businesses from high uplift costs following revaluation.
How can the Greater Birmingham Chamber of Commerce help?
The Greater Birmingham Chamber of Commerce work to keep members up to date on the latest developments regarding business rates through our media, communications and events. We also consult with members to understand their views on proposed changes to the Rating System through surveys and using the Greater Birmingham Chambers of Commerce Chamber Council to shape our policy output. We ensure the needs of local businesses are recognised by engaging with local and national stakeholders on this important topic.
How can business get further advice?
The Royal Institution of Chartered Surveyors (RICS) can recommend a reputable advisor to you and it is always worth seeking a recommendation from someone you know.
For specific advice on Business Rates, please email Colliers International at Rating@colliers.com or call the Colliers Rating team for further information on 0800 358 3230/0207 344 6565.
Colliers work closely with their valuations team and draw upon their in-depth market knowledge in order to effectively analyse data and query the approaches adopted by the Valuation Office Agency.
Their rating surveyors have extensive experience in both the public and private sectors, having had experience of providing evidence at both Valuation Tribunal and Upper Tribunal. They monitor all changing legislation and are well positioned to provide all clients with regular update newsletters throughout the duration of an instruction.
Colliers deliver timely advice on whether it's appropriate to launch appeals, setting out a clear business case. They have the valuation expertise and specialist rating knowledge to ensure that their customers rateable value is at the lowest level. Colliers actively respond to the government on any prospective changes to legislation ensure that you are informed of any changes in the law that might affect your rate liability. Their services include co-ordination with other bodies, prior agreement of a new property or for the 2021 Rating List, material change of circumstance appeals, focus on methods of valuation and case law specialists. Colliers have specialist surveyors within the team to handle every area of the market.
About the Greater Birmingham Chambers of Commerce
We have been in business, for business since 1813. Today’s GBCC exists to connect, support and grow local businesses. We offer an array of services and initiatives to businesses Across six geographical regions and four themed divisions. From our wide range of events, international trade services, policy and marketing campaigns, to networking opportunities and media exposure, the Chamber has something for business of all sizes and from all sectors.
For more information contact:
Cameron Uppal Policy and Public Affairs Advisor
Greater Birmingham Chambers of Commerce
C.Uppal@birmingham-chamber.com
