Small and medium-sized businesses (SMEs) should be reminded that any significant shift – up or down – in rateable values of the buildings they occupy may not hit them in the pocket – at least not immediately.
Business rates on non-domestic properties haven’t been revalued since 2010, when they were based upon 2008 values. Thus during the last recession buildings were still valued at inflated pre-recessionary levels.
Recession or no recession it is simply common sense that a level set in 2008 is unlikely to be appropriate the best part of a decade later.
In September the Valuation Office Agency (VOA) published the draft revaluation details of nearly two million non-domestic properties for the draft 2017 rating list.
Across England, rateable values are expected to rise by an average of around nine per cent, ranging from a 22.8 per cent increase in London to a 1.1 per cent fall in the North East.
After seven years of paying overinflated rates, ratepayers are unlikely to be jumping for joy at the prospect of further rates increase now a revaluation has finally arrived.
But the good news is that relief is potentially at hand for ratepayers seeing a large increase. During the revaluation hiatus, one of the measures that was brought in to try to ensure that they didn’t take a big hit from any rates increase was the business rates transitional relief scheme.
The scheme was introduced in the 1990 list to soften the increase incrementally from the previous list in 1973. Government has maintained transitional relief and has extended it to March 2017 for properties with a rateable value up to and including £50,000.
As a result of this measure, small properties with a rateable value of less than £18,000 (£25,500 in London) that would otherwise face bill increases above 15 per cent, and medium-sized properties with a rateable value of £50,000 or less that would otherwise face bill increases above 25 per cent, will benefit. (see table)
Transitional rate relief was introduced to limit how much business rates can rise or fall in a financial year. It is essentially a cushioning effect of any large increase or reduction in rateable values.
So while occupiers who have had a significant increase in their business rates (in central London, for example) won't get hit immediately with a massive rates hike, those who will see their rateable values go down significantly won't see the financial benefit straight away either. Instead, transitional relief will phase the reduced liability over a period of time, possibly over a number of years.
Ratepayers can find their current and draft rateable values on the VOA website. New business rates will come into effect in April next year.