Business rates mitigation

Revaluation

On 1 April 2017 the new business rates revaluation came into force. Whilst designed to bring rates in line with the changes in the rental property market, it is having a significant financial impact on businesses whose properties have not been revalued for some time and has dealt a big blow to many businesses, particularly in London, which are now looking at significant increases in their rates bills. There may be opportunities for businesses to challenge the revaluation if they believe the revised rateable value to be incorrect or to reduce their rates liability but the appeals process has been criticised for being bureaucratic and complex.

Check Challenge Appeal

To challenge a new business rates assessment, ratepayers and agents must register with the Government Gateway online and complete a process known as "Check Challenge and Appeal":

• Check: ask the Valuation Officer to clarify certain details about the property;
• Challenge: complete a form to set out the grounds for challenge and provide supporting evidence and an alternative valuation. There is a 4 month deadline from the "Check" decision to complete this form;
• Appeal: appeal to the Valuation Tribunal. There is 18 months from submitting the challenge to appeal to the Valuation Tribunal.

This process is a complicated time consuming administrative burden potentially reducing the chances of a successful outcome. As a general rule, an appeal must be made whilst the circumstances giving rise to the appeal exist as the property must be valued in the state which it is in at the date the appeal is lodged.

Separate assessment of floors in a building

The Supreme Court decision in Woolway v Mazars [2015] could have far reaching and unexpected cost implications for ratepayers. It held that non-contiguous floors in a building (which are accessed through communal areas) will be treated as separate premises for business rates purposes. However, the judges in the case went further to apply the same principle to two consecutive floors in the same building so that they could be "physically separated in much the same way as two non-consecutive floors". The effect is that businesses may be issued with individual rates bills per floor (losing the benefit of discounts and quantum allowances) even if they occupy contiguous floors in a building (except perhaps if these floors intercommunicate privately e.g. via an internal staircase). The Rating Department at Montagu Evans advise that corrections can be backdated in some locations as far back as 2010 and often there will be a shortfall in liability already paid that will now be demanded. They also advise that "the principles set out in the decision are universal and will apply to all manner of property types".

Major building works to result in nil or reduced rates bills

In the 2017 case of Newbigin v Monk the Supreme Court held that where a rated property is incapable of beneficial occupation due to significant building works it should be deleted from the ratings list or reduced to a nominal rateable value. On the face of it, this is good news for property owners, developers and ratepayers. Montagu Evans advise that the decision in Monk is a landmark decision which asserts the need for a "reality test" but is not a "panacea for building work rate reductions" as liability will only be reduced in certain circumstances, taking into account the nature and extent of the works and whether actual or partial use of the property is possible.

For example, if part of the property is undergoing major refurbishment and it is not possible to occupy that part, then the rates for this part of the property may be reduced to a nil value whilst the works are being carried out. The rates for the part of the property that it being occupied during the works could also enjoy a temporary reduction in rates if it is disturbed as a result of the works. Ratepayers may also benefit from a temporary reduction in rates liability if the property suffers disturbance from works outside the property (e.g. road works) which continue for a reasonable period (often 6 months) depending on the nature and severity of the disturbance.

Making an appeal can be time-consuming and expensive, so businesses should seek early professional advice to help manage the process.