Rating Revaluation 2017: Unfair Tax or The Cost of Doing Business?
28 November 2016 by Jordan-Ray Bennis
Almost seven years since the ‘rateable values’ of non-domestic properties were last reviewed in 2010, firms are preparing themselves for what have been described ‘the largest changes to business rates in a generation’.
The draft rating list for commercial properties throughout England and Wales was published by the Valuation Office Agency (VOA) last month, and is due to take effect on 1 April 2017. The new rateable values, which are based on rental levels exactly two years prior to the commencement date, will considerably increase the amount of tax paid by businesses owners operating from premises in the country’s most prosperous locations.
The City of London faces the largest increase, notes James Thompson of Deloitte. It is estimated that centrally located offices will see a thirty four per cent rise in business rates, while shops on the city’s famous Regent Street are be taxed an additional eighty seven per cent. The revaluation will also hit utilities, telecommunications and other service providers on the ‘central rating list’, whose bills are expected to rise by twenty eight per cent. According to Theo Paphitis, owner of Ryman and Robert Dyas, business rates are “the most unfair taxation ever” and often exceed the cost of rent.
Outside London and parts of the South East however, reductions in business rates are to occur countrywide. Decreases have been extensive in areas of low rental growth, with rates set to fall more than fifty per cent in Bolton, Blackpool and Tamworth come April 2017. In its recent analysis, the Institute of Fiscal Studies (IFS) observes that “[g] rowing differences in property prices reflects broader evidence of a growing divergence in economic performance over the last few years.” The institute reports that this divergence will make the UK government “more and more dependent on revenue from London to fund services across the whole – which may pose difficulties if more revenue sources are devolved to local level.”
The Department for Communities and Local Government plans to reduce the immediate impact of the hike by capping large increases in rates bills. However, in order to fund the arrangements, a cap will also be placed on reductions. Jerry Schurder, head of business rates at Gerald Eve, said “the transitional arrangements mean that rather than receiving the reductions straight away, bills will reduce by only 4.1% next year for larger properties and they will have to wait up to five years to feel the full benefit, which for many will be far too late.”
If you are not sure how your bill will change as a result of the revaluation, you can calculate your liability by checking the ‘rateable value’ of your property on the VOA website, here.
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