The 2023 business rates revaluation looks set to reduce retail rateable values nationally by 10%, which will of course be welcomed by owners and occupiers of retail properties.
This outcome is not unexpected. To arrive at the 2023 rateable values, the Valuation Office Agency (VOA) have estimated the open market rental value of properties on what is known as an antecedent valuation date (AVD). This estimate of the open market rental value of a property becomes known as the property’s rateable value. The AVD for the 2023 rating list is 1 April 2021, when rental values of properties in the retail sector had – broadly speaking – decreased since the previous AVD of 1 April 2015.
The extent to which occupiers of retail premises will benefit from a decrease in rateable value depends very much on geographical location; some are certainly going to benefit more than others. Even if your rateable value is set to decrease, it is nonetheless important to ensure your business rates liability is based upon correct and fair information. Action can be taken now to ensure you are paying only what you should, now and in the future. The VOA assess the rental value of retail properties assuming a hypothetical tenancy, on a price per square metre basis.
Units of this nature are generally measured in in terms of Zone A, which is a method of applying a unit of rent to the zones of the area of a unit for rental valuation purposes. The principle is that the most valuable area is to be found at the front, i.e., the display area, and that the value then declines with the increasing depth of the unit. The retail space is then divided into zones, usually of equal depth, with the value of the first zone being the greatest, with the value of each subsequent area being “halved-back” in value. The rate per sq. m itself is based upon local rental evidence at the AVD.
Properties are then assigned a valuation scheme, reflecting their location, quality and age, amongst other factors. It is therefore important to ensure the floor area informing your rateable value is correct as, if the VOA are basing their assessment upon too high a floor area, your rateable value could be too high. It is also important to check your property has been placed within the correct valuation scheme, and that the rate per square metre applied in the valuation appears fair within the parameters of the valuation scheme. If errors are discovered in the valuation of your property, the VOA must be informed via the Check, Challenge, Appeal (CCA) process. As the draft 2023 rating list has now been published, factual errors in your property valuation (such as the floor area) can be corrected prior to the list going live on 1 April 2023. This could lead to a reduction in your current and future rateable value. Appeals to the actual rate per square metre applied in the valuation of the property cannot be submitted until after 1 April 2023, however.
Meanwhile, any errors discovered in relation to rateable values in the current 2017 rating list can also still be appealed using the CCA process as long as a “Check” is submitted to the VOA before 31 March 2017. Any savings can be backdated as far as 1 April 2017, depending on individual circumstances.
Of course, not all retail occupiers will be enjoying a rateable value reduction; those in particularly popular areas may, in fact, face increases. If this is the case and if you are eligible, transitional relief will limit how much your bill can change as a result of the upcoming revaluation. For example, if your bill is increasing from 1 April 2023 and your rateable value is between £20,001 and £100,000, your bill will increase by 15% in 2023, 25% plus inflation in 2024 and 40% plus inflation in 2025.
Furthermore, if you are going to lose small business rates relief as a result of the revaluation, the government has introduced supporting small business relief to ensure your bill will increase by no more than £600 in 2023.
Whilst there is some initial protection from 1 April 2023, the effects of the revaluation will still be felt by owners and occupiers, with the intensity of the increases accelerating in subsequent years. Whether your rateable value is increasing or decreasing, now is therefore an excellent time to have your current and future rateable values checked by a professional advisor, both to secure any potential historic savings and to ensure your future liability is fair. Please contact [email protected] if you have any questions at all regarding your business rates.
