Investment in Dealerships can Increase Business Rates Liabilities | Altus Property Services

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Investment in Dealerships can Increase Business Rates Liabilities

April’s business rates revaluation produced some significant changes in rateable values and, notably, increased bills for dealerships on average.

Business rates are among the highest outgoings, along with rent and salary.  Rateable values are derived from rental values, and the latest assessment increases were intended to reflect changes in rental values over time. There was an average 11.31 percent increase in car showroom values since the previous rates revaluation seven years ago.

Why?  Dealerships need to rapidly respond to changes in motoring technology, car usage and ownership models, often impacting showroom presentation and format.  Investment in improvements, often determined by manufacturers, can increase rateable values and therefore operational costs. Investment may include conversion of a retail store, or address the perennial issue of display parking.

Changes may not increase property value, and are usually ignored at rent review, but may add to its rateable value, especially at the point of a revaluation.  Dealers should in fact expect increased liabilities after investing.

Does the Valuation Office Agency understand the need to incorporate repairs and servicing facilities, the pressure to store more cars, or add desk space for Finance?

Too formulaic an approach by the VOA fails to take account of the value drivers of modern operators or appreciate the complexity of rental agreements between manufacturers and operators.

All elements of a modern dealership – display spaces, customer spaces, depot spaces – attract different rates.  The VOA must have these areas correctly referenced.

The volume of car sales – and the profit available – already looks vulnerable to Brexit, and Sterling’s subsequent fall.  Increases in property costs will add to the pressure.

How can dealerships achieve the best outcome?  Tangibly, only through formal appeal.

The industry should also work with specialist rating advisers to remain competitive – to minimise penalty from each site, and possibly collectively lobby and educate the VOA in the complexities of selling cars in the new motoring age.

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