Following the Chancellor’s Autumn Statement and publication of the Draft 2023 Rating List last year, there is a considerable amount of change to the business rates system coming into effect.
Rob Cohen, Partner in Sanderson Weatherall’s Rating Team summaries these below.
Key Changes at a glance are:
- All non-domestic properties revalued with a new valuation date of 1 April 2021, to come into effect on bills issued from 1 April 2023
- No change in the rates multipliers which will remain at 0.499 for small properties and 0.512 for large properties
- Upwards on transitional phasing scheme put in place at 5% for small properties, 15% for medium properties and 30% for large properties
- Removal of downwards transitional phasing
- Retail, hospitality and leisure relief extended from 50% to 75%, with a cap per business of £110,000
These changes will have the most positive impact on the retail, leisure and hospitality sector. Retail assessments are set to decrease on average by 10% nationally but this incorporates much larger decreases in a number of regional city centres of 30 – 40% and less change in secondary locations and parts of London. Meanwhile hotels have decreased on average by 28%.
The removal of downwards transition, whereby the amount a rates bill can decrease following a revaluation would have formerly been capped, is of great assistance and means that businesses will see the full benefit of a reduction in their assessment. It also means that they will get the full benefit of any further reduction attainable by reducing the valuation via appeal.
By contrast industrial, logistics and complex plant and machinery based valuations will see considerable increases. This may not come as a surprise given the growth in rental values over the last 6 years but an average increase of 25% with high caps imposed by the transitional scheme being put in place means that, coupled with dramatically increased energy costs, it will place considerable financial pressure on some businesses. In respect of certain specialist and plant and machinery based valuations, which are valued by reference to their build costs, the increases in the cost of construction materials means that a number of properties are set to see their rates bills increase 40-50% over the next two years.
Other points to note from previous announcements are that there is now an exemption for renewable / green energy installations however this is not applicable in respect of commercially operated energy generating premises. There is also set to be the introduction of Improvement Relief, whereby improvements / extensions will be exempt from rates for the first 12 months after construction, although this will now be deferred to April 2024.
A final change to be aware of relates to how the maintenance of accurate valuations is administered. Duty to Notify provisions are due to be put in place over the next three years that will mean businesses will be required to inform the Valuation Office Agency of any factual inaccuracies in their valuations, when physical alterations are made and when there is a change to tenure details. This will be a burdensome task for some and mean that in respect of properties that have historic omissions in their valuations these will need declaring and their assessments may increase.
As well as considering contesting their valuations, for which a new right to appeal will exist from 1 April 2023, companies looking at restructuring should review the application of historic reliefs and exemptions related to Covid-19 and any periods properties may have been vacant. Sanderson Weatherall are able to advise in respect of all valuation and legislative matters that may impact and identify any opportunities that may exist to reclaim overpaid amounts or reduce ongoing liabilities.
Get more information on the 2023 Rating Revaluation