The Government announced yesterday that a revaluation of business rates planned for April 2021 will be postponed in order to “help reduce uncertainty” for firms affected by the impacts of coronavirus.
What is a revaluation?
A revaluation is the review of the rateable values of all non-domestic property at a particular point in time. The values are based on open market rental evidence set two years prior to the revaluation date known as the Antecedent Valuation Date (AVD).
Why do we have them?
As business rates are based on rental evidence, revaluations are carried out to maintain fairness in the system by reflecting changes in the property market. Historically, revaluations were carried out every five years, which would have meant a revaluation in April 2022. However, this was brought forward to April 2021 in 2018 by then Chancellor Philip Hammond to reflect the rapidly changing business climate.
What impact will the postponement have?
The proposed 2021 revaluation would have future rateable values at 1 April 2019 rental levels. However, the Covid-19 pandemic is likely to result in much reduced rental values for certain sectors, particularly bricks and mortar retail, and this can now be taken into account with a later revaluation date. It does however mean that retailers which have already witnessed dramatic reductions in rateable values will not see the benefit of their reduced liabilities for at least another year.
Many properties in the hospitality and leisure sectors, e.g. hotels and pubs are valued based on trading performance. These sectors are likely to be hardest hit by Covid-19 and are unlikely to see a recovery in trade until well beyond April 2021. Failure to postpone the revaluation would have meant rates being paid based on April 2019 trading performance which would no doubt have been the final nail in the coffin in what has already been a catastrophic year.
Conversely, those sectors which have unwittingly found themselves flourishing during the current crisis, namely online retail and distribution, may well be negatively impacted by the postponement of the revaluation.
Paul Nash, Director of Business Rates at Lambert Smith Hampton (LSH), commented:
“There is no doubt that this is positive news for the majority of beleaguered businesses in the retail sector. The question is, how much further will retail rents fall and will this be taken into account by the Government when setting the date for the next revaluation? There is also the question of transitional relief which, if it remains unbalanced, postponing the revaluation is unlikely to have much of an impact.
“What it does mean however, is that there is now more time to navigate the impenetrable Check Challenge Appeal process for existing 2017 rateable values. This will be a welcome relief for many ratepayers who risked running out of time to do so with a 2021 revaluation.
“It also provides time for the outcome of the Government’s recently announced review of the business rates system to be incorporated into future revaluations.”