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Autumn Budget 2017: Business Rates

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Summary: In today's Budget the Chancellor has made his mark on the business rates system with structural reforms of importance to all business rates payers.

Today's Budget offers good news for ratepayers in the shape of proposed reforms to the destination of business rates paid by ratepayers is relevant to ratepayers as ratepayers and also as citizens. Does the revenue flow to central or local government?

So the proposal by the Chancellor to pilot 100% business rates retention in London next year means that the approach taken by London government to rates collection and enforcement will be crucial. How aggressive will the London authorities be in relation to reliefs and enforcement?

The three-way relationship between billing authorities, the Valuation Office Agency and ratepayers becomes highly significant in London.

Outside of London and for the future, the Chancellor has made his mark on the business rates system with structural reforms of importance to all business rates payers.

Some changes will go straight to the bottom line. Others will serve to smooth the fluctuations in tax take which makes planning so difficult for business.

The rates payable for a property is the rateable value of the property multiplied by the rate. The rate is updated for inflation. From 1 April 2018, the rate will be updated by reference to CPI rather than ,as now, the more aggressive RPI. This will save ratepayers money in that the increases to take effect next 1 April will be less than had been expected.

The decision of the Supreme Court in the case of Woolway v Mazars [2015] UKSC 53 changed the law as to what constitutes a rateable unit of property (a hereditament). An outrageous consequence of this decision is widespread retrospective rating liability of occupiers. This occurs where, as a result of this decision, ratepayers of one unit who had paid their rates in full found that they occupied more than one unit with extra rates payable. And the ratepayers landed with extra liability would have paid up in full according to the previous law.

The notorious example is that adjoining floors in a building previously treated as one unit are now treated as two, unless the floors are connected by an internal staircase. The valuation consequence of splitting the unit is to increase the total rateable values.

The Chancellor will propose legislation to reverse the effect of this case.

This is a welcome proposal to deal with a real problem for ratepayers and an unprincipled and unintended outcome from the Supreme Court.

Landlords of pubs with a rateable value of up to £100,000 will welcome the extra year’s discount. Cheers to them, but this is small beer compared to the final structural reform.

After 2022, rates will be revalued every 3 years rather than every 5 years. The more frequent the valuations the less severe should be the changes in rateable value experienced by ratepayers.

There will only be one practical concern. How will the VOA cope with the extra workload?

Roger Cohen
020 3400 4346
roger.cohen@blplaw.com

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