26 August 2015, Increasing measures to reduce exceptions to the payment of business rates on premises make it all the more important to be aware of the true worth of your properties as revaluation approaches.
As business rates are payable on empty properties after the first three months that the property is empty (extended to six months in the case of certain industrial properties and with exemption for listed buildings) it is also important to either re-let a property as quickly as possible or mitigate the cost of rates that you, as landlord, may have to pay.
In the case of rural properties, a useful step is to move the property back into agricultural use by re-occupying it for your own purposes if possible. Some owners have seen making the property so uninhabitable that it cannot be used as a solution, perhaps using demolition as a last resort, but unless the building is already in a state of dilapidation this could be self-defeating on cost grounds. There are some instances where the individual occupier’s circumstances can bring a lower charge than the full empty rate provision and using short-term lets to temporary occupiers can also restart the rates-free void period.
The question of what defines agricultural use continues to be a topic of debate. The tenant of one of Carter Jonas’s clients, a producer of seeded mushroom compost, has been making the case to be agriculturally de-rated as opposed to rated for business use.
This long-running dispute has been going on for many years and was recently at the Court of Appeal. Unfortunately, the tenant’s argument was not sustained and the property continues to be liable for business rates. The process is that the seeded mushroom compost is produced from bought-in straw, poultry manure, and gypsum, seeded with mushroom spores, and the growing phase triggered. At this point the seeded compost is transported to mushroom farms (most of which are within the same company structure).
The argument is basically whether the property should be exempt from business rates as falling within the definition of “agricultural land” or if it qualifies as a market garden or nursery ground. The definitions are set up in the appropriate legislation and whilst the Valuation Tribunal agreed the site was agricultural, the Valuation Office successfully appealed to the Upper Chamber and the occupier then appealed to the Court of Appeal. Clearly such inconsistent outcomes only serve to demonstrate that this is a complex matter but not one which should be ignored. The cost of business rates is such that they need to be challenged whenever possible, even if a full exemption is not attainable.
Business rates are calculated on the basis of the property’s rateable value, what the property would let for under a certain hypothesis at a given valuation date. The current valuation date is April, 2008, and the valuation list is that of 2010 - the valuation date was two years before the inception of the list to allow for evidence to be analysed. The list should have been subject to renewal this year but the government has postponed this by two years and the new list is now expected in 2017 with a valuation date from this year.
Apart from the major issues as to whether a property is rateable or not, the nature of the assessment - whether that is correct, the rates applied and whether those are correct - and of course the floor areas upon which the assessment has been based all need close examination.
Business rates are an important tax from the point of view of the government and occupiers. They can also affect landlords in the case of empty properties. As they are cheap and very efficient to collect, they will be with us for many years yet so there remains every incentive to ensure that assessments are as competitive as they can be and that any available reliefs are fully taken advantage of.
With that in mind, arming yourself with the current professional valuation of your property in readiness for the 2017 list publication may be prudent if you feel that in the past your business rate assessment has been unfair.