Rates for the job

Many firms will have received a notice setting out a new ‘summary valuation’ for the properties they occupy from the Inland Revenue’s Valuation Office Agency (VOA). These are part of the process by which the VOA complies with its obligation to review the rateable value of non-domestic properties every five years.

The current programme values properties as their market price on 1 April 2003 and takes effect from 1 April 2005. Notices are being sent to around 1·75 million ratepayers.

The notice you receive will explain how the VOA calculated the rateable value of the property you occupy. Essentially it works out the property’s annual rental value based on the assumption that it was available to let on the open market at the valuation date. Rateable value is important since your rate bill depends on this value multiplied by a factor that is set each year by central government. The factor – the Uniform Business Rate – is 45.6p for the tax year 2004-05, but will be revised by the Chancellor for the next tax year beginning in April 2005.

The new round of valuations is expected to bring steep rises for the retail sector as, at the base date for the revaluations, rents in the retail sector were escalating. The British Retail Consortium estimates that, on average, rateable values in the retail sector will rise by 25%, which will mean a 6% increase in rate bills. This means, for example, most of the Bluewater retail centre in Kent will see their rateable values go up by 54%, the JJB sports outlet in Gateshead will see its value rise by 76%, and a fashion retailer in St Alban’s will see an increase of over 140%.

It is essential that businesses read the notice they receive from the VAO carefully, since failure to check its contents could have major cost implications. If businesses act promptly they can help ensure that new rating assessments are corrected before any incorrect rates demands are issued by their local authority.

Checking the facts

If you discover any factual inaccuracies on your summary valuation notice, you should make the necessary amendments and send it back to your local VOA office as soon as possible. You should hear within 20 days what action the VOA intends to take.

If you do not dispute the summary valuation you need do nothing. It will be formally adopted for your property and your future rates bills will be based on it. If you do dispute it, you have the right to make a formal appeal. You can send your appeal direct to the VOA, by correspondence or via the VOA website (www.voa.gov.uk). However, appeals cannot be made until the new scheme has come into effect on 1 April. Appeals can be made at any time during the five year ‘life’ of the new valuations.

At present, under half of all assessments are challenged, and only a tiny number of bills are properly queried by businesses. Given that the new assessment will be in place for five years, it is essential that any errors or contested assumptions are brought to the VOA’s attention.

On the same date the new rating assessments come into effect, small firms will also be affected by the introduction of a new Small Business rate relief scheme. The details of the new scheme are being completed, but it looks likely that under it rate relief will be available if the rate payer occupies only one property and this has a rateable value of under £15,000.

Properties with a rateable value below £5000 will receive relief of 50%; this will reduce on a straight-line basis to 0% when the rateable value reaches £10,000. While this might sound generous, the reality is that a business operating from one property, which has a rateable value of £9 500, would receive a saving of only £3.82.

Moreover, a small firm that operates from two premises that have a combined rateable value of £9 500 will find itself ineligible for the relief and will have to pay a 1·6% surcharge. The surcharge is a percentage increase in the Uniform Business Rate (UBR), which will apply to all businesses that are not eligible for rate relief.

Exemptions and relief

There is good news for sole property occupiers whose assessments are between £10 000 and £15 000. Those who fall within this band can apply to their local authority each year for exemption from the surcharge. Those who are successful in their applications will be made exempt from having to pay the surcharge.

Remember that a range of other reliefs are available to businesses; often these are subject to the discretion of local authorities. Where a property is used wholly or mainly for charitable purposes, the charity can apply to its local authority for an 80% reduction in its bill. Any local authority, at its discretion, can reduce the bill further or cancel it altogether.

If your business is in a ‘qualifying rural village’ and has a rateable value of under £12 000, your local authority, again at its discretion, can write off your bill completely if it agrees that your business is of benefit to the local community. If you are experiencing genuine hardship and cannot pay your bill, your local authority may decide to give you relief from part or all of your liability. Authorities are only likely to agree to do this if your business is particularly important to the local community.

Also remember that, whatever new rateable value is allotted to your property from April 2005, you may qualify for ‘transitional relief’. This is available to any business where a new rateable value results in a significant increase on the previous years’ liability. Transitional relief will continue to be available in England after April 2005; it has already been abolished in Wales and Scotland.

Ratepayers with queries about their new rateable value should discuss the matter with their accountant or contact the VOA helpline (0845 602 1507).