The Valuation Office Agency is currently assessing almost 2m businesses across the country and the postponed rating list will become effective from 1 April 2017 based on values at 1 April 2015. Businesses will finally find out how the redistribution of the rates burden will affect them for the next five years. The current 2010 rating list framework is based on rental values in 2008, just before the great recession hit.
There will almost certainly be a reduction in liability for many businesses in areas outside of London and the south-east. However, it is unlikely that the winners will see levels of savings that might have been realised had the 2015 revaluation gone ahead. This would have been based upon 2013 rental values, well into the recession. The two year delay means that some properties will have seen a recovery in values in line with the economic revival. Some prime properties may even have regained the values they last saw at the height of 2008, which means that their rate liability may even rise.
The retail sector has been the worst hit from the deferred revaluation date and many pitches have seen business rates overtake rents, which have fallen by as much as 50% while rates rise annually in line with the RPI. Although some historic market towns have held firm, most Welsh high streets have suffered badly, hit by a substantial decline in what were formerly prime pitches, exacerbated by empty units and competition from online retailers deterring shoppers.
It is possible the new list could see rate liabilities on these high streets drop by up to 20%. Shopping centres away from prime destination locations have also suffered and may see 10-14% reductions. High streets in parts of England such as the south-west, the Midlands and the north haven't fared much better than Wales, and liabilities in secondary and provincial towns may decrease by around 13%. A knock-on impact on retail warehouses may be reflected by reductions in liabilities, although parts of England have fared better. The office sector presents a different picture having enjoyed a stronger recovery and although some downward adjustments are likely, hot spots will see increases.
Ultimately individual liabilities will be determined by a combination of the rateable value and the multiplier. The multiplier will increase if total rateable values decrease as a result of the revaluation, in order to maintain revenue. As always there will be winners and losers. As a member of the RICS National Rating and Local Taxation Policy Panel and the Welsh Ratepayers Forum I have been lobbying for more regular revaluations to reflect movements in property values and maintain a fairer tax base - particularly poignant during recession. We would, over time, like to see a move to bi-annual or even annual valuations. In the meantime, we hope that the 2017 list will help to redress the imbalance between rent and rates so that high street retailers and other adversely affected businesses do not carry an excessive burden any longer.
If you require further details please contact me or my colleagues, Jane Shankland or Huw Jones