A decision by the UK Supreme Court on business rates in shared office buildings will lead to higher fees for many businesses in Scotland, according to commercial property experts at Colliers International.
The firm says that the case of Woolway Valuation Office v Mazars, in which the Supreme Court held that businesses occupying space across several floors or areas within a building, should pay separate rates for each, will lead to changes in valuations across the country that will cost firms millions of pounds.
Up until now, such arrangements were charged as a “single occupation” and benefited from economies of scale. Paying for two separate sets of rates is likely to be more expensive, and the court decision even allows for the changes to be implemented retrospectively.
Peter Muir, head of rating with Colliers International in Scotland, said: “For a large firm occupying several – but not all – floors in a prime office building, rates could be higher by tens of thousands of pounds a year.”
He added: “It is not yet clear that valuation offices in Scotland will implement the changes. While it is down to individual valuation offices, I believe they will eventually implement this, as it is a Supreme Court decision and finance departments will be writing to assessors to ask about the potential extra revenue.
“However, valuation offices are very busy at the moment with the upcoming re-valuation, so they wait until 2017 to bring this into force.”
Mr Muir expects that the effect north of the Border would be felt in Edinburgh, Glasgow and Aberdeen, the cities with concentrations of large, multiple-occupancy office blocks. He said: “There is little businesses can do, other than take into account the likely changes when considering signing a lease, although in some cases it may be possible to get round the ruling by ensuring that consecutive floors are connected internally, without using communal areas.”
The Supreme Court’s ruling related to Mazars’ occupation of the second and sixth floors of an office building, but Colliers says that the precedent will also apply to consecutive floors if they are linked by communal areas of the block.
Peter Muir continued: “Viewing consecutive floors as a single occupation marks a departure from the Valuation Office Authority’s (VOA) normal practice. Any changes made by the VOA, and any consequential increases in liability – which will is likely to influence the Scottish Government, could potentially be retrospective from 1 April 2010, if the VOA takes action before 1 April 2016.”
Ratepayers who already have outstanding appeals involving continuous floors could have them quashed or disregarded, he added.