Big firms to be hammered in business rates revaluation
Gerald Eve’s Jerry Schurder: “Madness that bills not reducing quickly for struggling firms”
Big businesses in England are set to be “hammered” in the forthcoming business rates revaluation, with newly-published Government proposals outlining a transitional relief scheme that will see bills for large properties rise in their first year by as much as 45%, while any reductions are limited to just 4.1%.
‘Transitional relief’ is a system whereby large increases in bills as a result of revaluation are phased in over up to five years to reduce the shock to a business, with first-year increases previously limited to 12.5%; as a corollary, those properties seeing large falls have their decreases also phased to pay for the scheme.
Under the Government’s amended relief scheme outlined today, bills for large properties – those with a rateable value of more than £100,000 – will see their bills rocket by as much as 45% in the first year. On the flipside, those large properties deserving big falls in their liabilities as a result of revaluation will see their decreases limited to only 4.1% in the first year, denying them the immediate benefit of a reduction in business rates they have been crying out for.
The effect of these proposals will be most-keenly felt by large properties experiencing either the largest increases or biggest falls as a result of next April’s revaluation, details of which become public on Friday. Gerald Eve has forecast huge rises in business rates liabilities for central London retail – Oxford Street, Regent Street and Bond Street retailers are predicted to see average increases of 80% – and retailers here will see massive rises in April when the revaluation come into effect.
For example, Regent Street toy shop Hamleys’ liability is predicted to rise by 60% as a result of the revaluation. Under previous transitional arrangements, its bill in the first year of revaluation would only have risen by 12.5%, but with the new scheme its bill from April onwards will rise by 50% once inflation and other rates supplements are built in, some £500,000 extra to pay.
Conversely, the large firms and properties that have most-struggled since 2008 will have to wait five years to feel the full benefit of falling rates liabilities. Huge swathes of the country outside the south east have been through hard times – and thus were anticipating large decreases in their rates bills – will instead see falls of just 4.1% in the first year of the revaluation.
Jerry Schurder, head of business rates at Gerald Eve, said: “The Government claimed it would reform business rates to deliver a fair, simple and transparent tax and its latest proposals breach each of these commitments. It rightly took 600,000 small firms out of business rates entirely at the last Budget, but has now decided to hammer the occupiers of large properties.
“How businesses can accommodate year-on-year rises of 45% with only 6 months’ notice is beyond me, but even worse is the severely restricted falls for those properties that should have been in line for greatly reduced business rates bills. Businesses in the hard-pressed industrial heartlands have been crying out for reduced rates bills for seven years now since the last revaluation, and at the point at which they finally see light at the end of the tunnel, the Government whips the carpet from under their feet.
Nobody is claiming that phasing in the largest increases to help firms address sudden increases is a bad idea, but it is madness that this protection is paid for by denying full and immediate reductions to those in greatest need of them.
“The costs of phased increases should be paid for by Government – not by those ratepayers in desperate need of reduced bills. The extent to which the Government views big business as a cash cow to be milked until dry is simply astonishing.”
Don’t Believe The Hype
Gerald Eve has also warned firms “don’t believe the hype” behind the Government’s latest positive announcement regarding changes to business rates in next year’s revaluation.
Using revaluation data from the Valuation Office Agency, the Government has announced that three quarters of firms will see their rates bills remain the same or fall. But despite the Government presenting the changes as being of little concern to most businesses, Gerald Eve has warned that there are major losers hidden among the statistics, with many companies facing substantial increases in their rates bills and bad news too even for those whose rates are falling.
Jerry Schurder, head of business rates at Gerald Eve, said: “The Government’s figures imply that the impact of the revaluation will be modest, with mostly falls or minimal shifts in bills despite the huge changes in business landscape since the last revaluation.
“In reality, these high-level summary statistics are a smokescreen, hiding a multitude of bad news stories for hard-pressed firms. The Government’s data suggests moderate increases, but neglects to mention, for example, the 120% increase faced by Bond Street retailers or the 40% increase for occupiers of central London skyscrapers which we expect to be revealed once the 2017 assessments become public on Friday.
“We say to firms: don’t be lulled into a false sense of security. The unique nature of the revaluation – whereby the overall take is kept constant with individual liabilities a reflection of property value movements relative to every other commercial property in the country – means that actual shifts in bill levels are hard to extrapolate from general trends. The Government is counting on this to hide the bad news from those facing large rises.
“UK plc should take no comfort from the generalised figures the Government is announcing as ‘evidence’ of the nominal impact of the revaluation. The economic picture is very different to 2008, when the last revaluation was undertaken, and firms should seek detailed advice as to how their own bills will change rather than rely on Government generalities.”