As 2022 gets underway, businesses across the UK are facing up to the financial implications of Covid-19, Brexit, climate change and sustainability.
Some forward-thinking businesses will also be looking ahead to April 2023, when the next business rates revaluation will take place. The rates revaluation creates another financial uncertainty for rate payers: how will property values shift and at what level will the multiplier be set? Ultimately, what will businesses pay in business rates? So, this year is a crucial year for all rates payers – a window in which to establish values and budget for the next three-year cycle and beyond.
In addition to the revaluation, the government is also undertaking a review of the business rates system, with the consultation closing on 22nd February. The review will have far-reaching implications for all rate payers, affecting businesses and rates payable for years to come. On the face of it, the review of the system proposes significant administrative changes, which are likely to make life far more onerous and difficult for many rate payers, particularly those with sizeable, more complex property portfolios. Undoubtedly, the financial implications of the consultation will be many and varied.
As an experienced team of property experts in the aviation sector, Gerald Eve is aware that the aviation industry has been one of – if not the – worst hit sectors by the Covid-19 pandemic. The initial lockdown and travel restrictions decimated numbers of passengers and flights, with new variants resulting in more restrictions and more uncertainty. Meanwhile, though major UK airports and airfields contribute over £220m in business rates to the Exchequer, the aviation sector received limited targeted relief – the AGOSS (Airport and Ground Operations Support Scheme), which provided limited financial support based on rates liabilities in 2020/2021, and is set to end shortly.
Then there was the much-vaunted £1.5bn Covid-19 Additional Relief Fund (CARF), provided as compensation for removing the rate payers’ right to challenge property rateable values resulting from the effects of the Covid pandemic. However, the CARF was not awarded to any rate payers/businesses eligible for AGOSS. So, the future of the aviation sector hangs on how the Valuation Office Agency (VOA) – a government agency that values properties and sets the rateable values – assesses the impact of Covid-19 on the aviation sector at the business rates revaluation in April 2023.
The 2023 revaluation has huge financial implications for all rate payers in the aviation sector – and no doubt there will be winners and losers. But rate payers need to know at an early stage what is likely to happen, as this will impact their financial forecasting. There is also further uncertainty around the statutory decapitalisation rate (for cost-based valuations, which are traditionally used for airports) and the transitional phasing scheme, which limits the upward and downward increases in liability following significant changes to the rateable value.
The VOA are duty bound to produce draft values by the autumn of this year. Once established, these values will be difficult to change without recourse to the formal Check Challenge Appeal (CCA) procedure, which can be a slow process. Businesses must ensure their voices are heard so that, at revaluation, the impact of the pandemic on the sector is fairly and appropriately reflected.
As we enter 2022, businesses must ensure that business rates planning is given due consideration. This will mitigate a potentially nasty surprise at next year’s revaluation. Should you wish to discuss business rates with our expert aviation team, please contact us using the contact information below.
