Are you a winner or a loser? I mean that in relation to the business rates revaluation. It is an issue attracting not just lots of column centimetres in the press, but collective column metres.
The government has now revalued all 1.96m business properties in the country. From April 2017, rateable values will be based on a property’s rental value as of April 2015.
Revaluation has been delayed, meaning that new business rates will reflect changes in property prices over seven years. That could potentially double the rates of some business properties.
Business properties with a rateable value of under £12,000 will be removed from the system altogether, and a yearly rate increase cap has been set to soften the impact of rate increases on small businesses.
Despite previous assurance from the Department of Communities and Local Government that no small business would see an increase above 5% in the revaluations, figures have shown that in some cases, business rates could be doubled. I have read of one case of a 173% increase.
So, overall, who are the winners and losers under the new business rates system?
The ‘big four’ UK supermarkets – Asda, Sainsbury’s, Tesco and Morrison – are set to be some of the biggest winners after the business rates change.
Favourable reassessment saw the rateable value of the average superstore fall by 5.9 per cent – £79,368 on average for each store. The big four will enjoy significant savings on the business rates change from April 2018.
By taking £173m off the combined rateable value of the country’s biggest supermarket units, the average superstore can expect a tax saving of £38,000.
But it is not just the supermarkets which are winners. According to research from the Centre for Cities think tank, the greatest decline in business rate payments will be found in Lancashire.
Business owners in Blackburn can expect to see their bills cut by a quarter on average, and those in Blackpool can plan on a similar reduction.
As a general rule the expectation is that most businesses will benefit. However, there is a North-South divide on this. After the last valuation businesses across the North, the Midlands and Wales had been overpaying, while those in the South-East had been undercharged. Predictably, therefore, it is London and the Home Counties where the horror stories are coming from.
London losers
That is a phrase you rarely see, but, because between 2008 and 2015, property prices in London increased by more than a third, the capital’s small businesses could be hit hardest by business rate re-assessment, following that huge growth in property value.
Three-quarters of business owners there have cited rate increases as the single biggest threat to business survival. The average small business expects a bill of £17,000 over the next five years. The Institute of Fiscal Studies says that London business rates will increase by some 11% above inflation over the next five years compared to a 10% reduction in the north.
The Federation of Small Businesses (FSB) has called for the entry threshold to increase to £20,000 for inner London and £15,000 for outer London.
A divisive issue for some London businesses is the Crossrail Levy of 4% on the 47,000 businesses with a rateable value above £55,000. That number is set to rise by almost 10,000 more companies. There are moves afoot to persuade the London Mayor, Sadiq Khan to put a moratorium on that increase.
If you own one of the affected businesses you could move out of London. Reading would apparently be a poor choice because it looks like being the hardest hit apart from the capital. Southend, on the other hand, will have about 70% of its businesses exempted from business rates. Fancy going to work on a scooter, anyone?
Better still, you could move to the far South-West. Some towns there lost 30% of property valuations, with similar reductions in business rates about to apply. Especially if you decided to develop online business, Cornwall could be a good choice. Some years ago they invested an EU grant in high speed broadband. Whatever you have read, there are affordable homes available in Cornwall, especially if you have sold one in the South-East.
If you do not like your valuation you will have to go through the ‘check challenge appeal’ process. The check stage ensures that relevant facts are agreed with rating adjusted as appropriate. The challenge stage allows you to set out your case for a lower rating backed by supporting evidence. The appeal stage allows you to appeal to the independent Valuation Tribunal for England.
Before you start that process, read the information on the government website. Do a Google search for ‘check challenge appeal’. It has been criticised as too complicated. I disagree. Certainly it is long and detailed, but so it should be.
When you do that Google search you will see details of lawyers and others punting their services. I recommend wariness. This happened at the last revaluation and some firms were closed down for dodgy practice.