Earlier this year, the government announced the ‘biggest package of business rates support in over 20 years’, as part of its economic plan. Measures included a cap on future increases, a rollover of the business rates relief scheme and a £1,000 rates discount for small businesses with a rateable value up to £50,000.
Much of this – announced in both the last Autumn Statement and Budget 2014 – was welcomed by small businesses and high street retailers. It does, however, fail to get at the bigger picture of business rate revaluation, or even of reform of the system. As there is no commitment to reviewing rates assessments until well into the next Parliament, this is more tweaking instead of real change.
So what can businesses do in the meantime to reduce the burden of business rates? Scott Osborne of property consultancy Innes England explains one such measure.
“I am increasingly being asked by landlords and property owners ‘what can I do to reduce or limit my business rates liability?’ Unfortunately, there is no definitive answer or formula, but each property can be assessed on its individual merits to see if there is an opportunity to reduce the liability,” says Scott.
Acting on behalf of Kendon Packing Ltd, Innes England has recently successfully helped to limit the rates liability on a substantial industrial unit in Netherfield, Nottinghamshire.
“It is common knowledge that where a property, or ‘hereditament’, becomes empty for over three months for shops and offices, or six months in the case of industrial units, then empty property business rates relief cannot be claimed and the liability to pay business rates rests with the landlord.
“The unit had been unoccupied for several years and it was apparent that the cost to reinstate the property back into a suitable state of repair was substantial,” says Scott.
“One avenue that can be explored is to look at whether a property is rendered ‘incapable of beneficial occupation’ as a result of some ‘external factor’. If so, it may be possible to have it removed from the rating list.
“The process is not straightforward and requires negotiations with valuation officers but in this case, there were good grounds to substantiate removal from the rating list”.
When considering the rateable value, the Valuation Office Agency (VOA) is required to assume premises are in reasonable repair unless it would not be economical to repair the property, and without such repair being undertaken there would be no demand for the property.
With the assistance of Innes England’s in-house building surveyors, Scott was able to not only reduce the rates liability but to have Kendon Packing’s hereditament removed from the rating list altogether, which enabled the client to recoup a six-figure sum.
Ultimately, the whole system needs a shake-up. However, when you consider that in 2012/13, councils collected a total of £21.9 billion from businesses, you can see why the government is only prepared to tinker around the edges rather than bring about wholesale reform. In the meantime, it is important to work within the current framework to look at every potential opportunity to mitigate such liabilities and reduce costs for businesses.
