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What independent schools need to know

Business Rates: what independent schools need to know

The anticipated loss of the 80% rate relief for charitable schools is, quite understandably, stirring considerable unease across the sector. Coupled with the broader cost pressures and the looming threat of VAT being levied on school fees, concerns about business rates bills are reaching new heights.

2024/25 UBRs

The Uniform Business Rate has been frozen since 2020, but for 2024/2025 the governments, have reinstated increases. For England, the standard rate has had an inflationary-linked increase of 6.7% to 54.6p, the small has remained frozen. In Wales, the increase in the rate is from 53.5 to 56.2p. In Scotland, the basic rate has been kept at 49.8p, the intermediate has increased to 54.5p and the higher is now 55.9p. View here for details of the UBRs and the thresholds. 


2023 Rateable Value Assessments

Many schools were able to make successful appeals against their Business Rates for the 2017 Rating List (1 April 2017 to 31 March 2023), following the agreement of a new national valuation scheme. This was the result of negotiations with the Valuation Office (VOA) by the three main firms advising in this sector, Gerald Eve being one of them. A new set of Rateable Values took effect on 1 April 2023 and with the figures once again increasing, schools and their advisors are starting to consider how we can, once again, challenge the Rateable Values set by the VOA.

There is currently no imminent deadline to commence the “Check, Challenge, Appeal” process for the 2023 Rating List in England and Wales, which is anticipated to remain open until 31 March 2026. However, give the timescales involved in the process, we would recommend commencing the process as soon as possible.

The situation in Scotland is very different, with a very short appeals window which ended on 31 August 2023.

For schools in city centres, there is often a clear rental market on which the VOA can base their assessments. However, most independent schools are valued on the “Contractors Basis” i.e. with reference to re-building costs. With consistent rises in building costs and a move away from this basis in other sectors, most notably museums, there is an argument that an income and expenditure-based approach may be more appropriate, as used for hotels, cinemas and pubs. The theory is that the surplus generated by schools may indicate the amount which they could afford to pay by way of a hypothetical rent.

It does not seem unreasonable to review whether assessments based on ever-increasing building costs can be justified and whether the financial pressure on schools points to a likely fall in rental values.


Legislative changes

Legislation enabling a ‘Duty to Inform’ was passed last year. Once the regulations are in place, this will be the first time that rate payers have ever been under an obligation to declare changes to their properties. From what has been released so far, it seems that there will be a statutory requirement on rate payers to declare relevant changes to their premises within 60 days, such as changes of occupation, tenure or physical factors, and to also make an annual declaration.

The Valuation Office records are not always up to date and of particular interest to schools will be to what extent they will be required to verify the data held by the Valuation Office and whether any historic omissions might need to be declared. On a more positive note – the new ‘Improvement Relief’ will mean that qualifying new buildings or extensions completed after 1 April 2024 can be excluded from your rates for one year.

In the face of an increasing need to manage risk and ensure accurate budget planning for business rates liabilities, we are here to offer guidance and support. Please contact Andrew Altman for more information.

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