Q&A: rateable values
Mark Day, Head of Leisure and Licensed Property Valuations at the Valuation Office Agency (VOA), answers questions on the forthcoming revaluation of business rates and how this might affect your pub.
More information on the work of the VOA is available at www.voa.gov.uk.
1. When are business rates being reassessed and how does the process work?
The next revaluation comes into effect on 1 April 2010, with all commercial property being re-assessed by reference to its value as at 1 April 2008. The basis of valuation is rateable value, which represents our estimate of the rental value of the property at this date.
The revaluation process maintains fairness in the rating system by re-assessing the rateable values of all properties every 5 years - the current rateable values have been effective since 1 April 2005. The revaluation is necessary because the relative value of property changes over time. In some locations, or for certain property types, rental values will have increased by a greater extent than the national average, whilst in others they will have decreased in relative terms. The revaluation enables these changes to be reflected in rateable values and so ensures that each business contributes to local services based on the up-to-date position.
When considering the valuation of pubs and other leisure properties we usually need to request information about the business, such as trading receipts, in order to be able to gain an understanding of the level of fair maintainable trade. This is a factor that influences rental values that businesses pay to property owners and so also affects rateable values.
With the 2010 revaluation, for the first time, we will be sending individual pubs the breakdown of their rateable value assessments. We will be doing this six months before the values come into effect in order to give people the opportunity to check the details we hold and raise any queries if necessary. The intention is for everyone to be assured that their rateable value is accurate and that they have been treated fairly.
We will be consulting with the British Beer and Pub Association, and others representing the industry, on the information we will be sending out, to ensure it is clear for licensees and in line with what they require.
2. Does an increase in my rateable value as a result of revaluation mean my business rates bill will increase?
The rates an individual occupier pays are calculated by applying a factor known as the multiplier to the rateable value. Currently, the standard multiplier in England is 46.2p, and 46.6p in Wales. In simple terms, if your property is in England and has a rateable value of £25,000, the current year's business rates liability will be £11,550. At revaluation, the multiplier is recalculated on the basis of the total of the new rateable values of all properties; if this total has increased at revaluation the multiplier will be reduced to achieve no greater yield from business rates. In practice, this means that an increase in rateable value does not always mean an increased rates bill.
3. What should licensees do if they want to apply for a reduction in business rates?
As explained above, the local authority calculates the actual business rates bill, using the rateable value that we have determined. A reduction in business rates may result from either a reduction in the rateable value, or an adjustment to the rates payable due to a discount or relief that the local authority is able to apply.
From our point of view, we are committed to providing valuations that are right first time. We achieve this by gathering as much relevant information as possible in advance, by ensuring that the information we hold is up-to-date and accurate, and by maintaining a sound understanding and awareness of the industry and the rental market. That said, if a licensee has reason to believe that their rateable value is too high, I would advise them to speak to us in the first instance to see if we can provide them with answers or resolve their query quickly. If, having spoken to us, they still feel that their rateable value is wrong, they have the right to make a formal appeal - subject to various restrictions contained in the rating legislation.
On the local authority side, licensees may find it useful to find out if they are eligible for any relief on their bill. For instance, in England, small business rate relief is available for certain businesses with a rateable value of less than £15,000 (or less than £21,500 in London). Different values apply in Wales. I would advise licensees to contact their local authority to find out more. Information on the forms of relief available is also on www.businesslink.gov.uk.
4. Under what circumstances will pubs be granted a cut in business rates?
As I've said there may be some form of relief available from the local authority for certain properties.
For there to be a reduction in the rateable value, we would need to establish that, in the light of all the available evidence and facts concerning a property and its location, the rateable value is wrong and needs adjusting.
Any adjustment may be in acknowledgement of physical matters in respect of the location and extent of the property, or more difficult to quantify matters that impact on how the business may be conducted within the property.
Each case is considered on its own merits - if we do adjust the rateable value, we would inform the local authority, which would then recalculate the business rates bill for that particular pub.
5. How long does it take to get a reduction in business rates?
As regards a reduction in the rateable value, I can't really give a definitive answer as it depends on the nature of the enquiry and how much investigation we need to carry out in order to reach a decision. We recognise that waiting for a decision can be a frustrating process and do all we can to reach a conclusion as quickly as possible.
It's best if licensees talk to their local authority about potential reliefs applied to their bills and how quickly these can be processed.
6. What reductions have pubs typically secured in recent times, as a percentage and amount?
There isn't a typical situation that I can refer to in order for me to answer this. I certainly would not wish to give people false expectation based on a sweeping statement. Be assured, each case is considered on its own merits and accordingly, if a reduction to the rateable value is made it will depend on the individual factors affecting a property and its location. To try and roll this into some sort of statistic would be meaningless and not at all helpful.
7. I've been approached by someone offering to get me a reduction in business rates for my pub for a fee. Should I take their service?
We have regularly encouraged licensees to be wary of anyone making promises of a reduction in rateable value before knowing the first thing about the business being carried out at the property. There are many trustworthy advisors, but we do urge licensees to carefully check the details of any service they are offered before signing up to a contract or making any payment. We regularly consult with the professional organisations representing rating advisors on how matters are being handled. Organisations such as the Royal Institution of Chartered Surveyors (RICS) are able to offer advice and maintain lists of suitably qualified advisors.
And as I've said before - we are happy to discuss rateable values with licensees informally; if we can't resolve the query to your satisfaction at this level, you can make a formal appeal directly to us. This costs you nothing.
8. Will pubs that have diversifie
