Transitional relief will swallow savings for many occupiers outside London and the South East
As the first business rates bills are issued in February and March of this year, ahead of the 2017 revaluation taking effect on 1 April, rating adviser Altus Group warns that many ratepayers in economically disadvantaged areas of England and Wales will be shocked to find their bills barely changed in comparison with substantial falls in rateable values.
Larger business premises in these areas, in particular those with the most significant revaluations, may never receive the full benefit of this decline in values if the next revaluation takes effect before the end of the transitional period.
Transitional relief, designed to protect businesses from substantial increases in their rates bills, is operating to deny expected savings to those in areas with falling values and these businesses will find business rates a disproportionate part of their property costs.
Transitional relief is self-financing for the public purse, with increases in some areas subsidised by reduced savings in others, and lasts until the change has been smoothed out, year by year. Due to the deferral of revaluation from 2015 to 2017 and the substantial change in rentals since the last valuation in 2010, the effect of transitional relief will be pronounced on this occasion.
Altus Group gives the example of a business with a rateable value falling from £445,000 in 2010 to £255,000 in 2017. If the owner is expecting a proportional fall in their rates bill for 2017/18 to £122,145, they will be disappointed to find that transitional relief of £91,850 takes their actual bill up to £213,995. Over the next five years they will pay £366,300 in transitional relief, boosting their total bill from £634,440 to £1,000,740. Their final bill in 2021/22 will still be £186,726, substantially above the estimated £131,385 they would be paying without transitional relief.
Altus Group UK President of Business Rates, Alex Probyn, comments, “The weight of transitional relief is a result of soaring values, especially in London and in the prime retail sector. Other areas and sectors throughout the UK have struggled in comparison. For them, this will offer no meaningful relief at all as they must subsidise those regions that are prospering. It won’t feel like the fair deal that many were expecting after so long.”
Businesses are encouraged to urgently review their current rateable value to ensure it is at the lowest possible level as, under the transitional arrangements, it may be this figure which dictates their liability rather than the new assessment value. Appeals against the current values can only be made until 31 March, 2017 so time is of the essence.
Those wanting to pre-empt their invoices and establish their business rates liability under the new valuation can use the Government’s estimator at https://www.gov.uk/correct-your-business-rates.
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