The government has announced that there will be a revaluation of business rates, which will come into effect on 1st April 2017. The changes will mean some businesses across the country will see a reduction in bills that accurately reflect changes in their local property market. This unprecedented cut in business rates equates to a £6.7 billion package over the next 5 years. The controversial revaluation is already causing a divide between the north and south – but how will it affect businesses in the manufacturing sector?
The Department for Communities and Local Government (DCLG) has confirmed that approximately three-quarters of businesses across the country will see no change, or a reduction to their bills. The changes that will contribute to a reduction include:
- Small Business Rate Relief
As part of the £6.7 billion package of business rates cuts over the next 5 years, the government has permanently doubled the ‘Small Business Rate Relief’ threshold, which is set out in the table below.
Before 1st April 2017
On or after 1st April 2017
- 100% relief on eligible properties with a rateable value of £6,000 or less
- 100% relief on eligible properties with a rateable value of £12,000 or less
- Rate of relief decreases gradually from 100% to 0% for eligible properties with a rateable value between £6,001 and £12,000
- Rate of relief decreases gradually from 100% to 0% for eligible properties with a rateable value between £12,001 and £15,000
For those eligible properties, this will mean approximately 600,000 small businesses will pay no business rates at all.
- Empty property relief
Business rates are payable not only for occupied properties, but also for vacant properties (subject to exceptions). Currently, empty non-domestic properties with a rateable value below a certain threshold are exempt from business rates.
The Non-Domestic Rating (Reliefs, Thresholds and Amendment) (England) Order 2017 (SI 2017/102) increases that threshold from £2,600 to £2,900, with effect from 1st April 2017. This change should alleviate the financial burden on manufacturing businesses who have surplus property.
Advanced Manufacturing and Engineering (AME) Sector in the Midlands Engine
The revaluation of rates should benefit the majority of the businesses based in the Midlands, which is the heartland of the manufacturing sector. The Midlands has a strong AME base which employs 637,400 people and accounts for 19.7% of the UK’s manufacturing output.
It is estimated that businesses in the Midlands Engine will see their bills reduce by an average 5% – a deduction of £230 million a year.
- West Midlands businesses should benefit from an average 7% fall in business rates before inflation and transitional relief – equivalent to a fall of almost £170 million a year; and
- East Midlands businesses should benefit from an average 3% drop in business rates bills – equivalent to £60 million a year.
In particular, key cities in the Midlands benefitting from a reduction include:
- Birmingham – an average 6% cut in bills
- Coventry – an average 7% cut in bills
- Derby – an average 4% cut in bills
The revaluation is likely to boost the Midlands Engine, which is perfectly positioned to take advantage of the economic growth, productivity and skills opportunities in the region.
Is everyone a winner?
Not all businesses will benefit from the revaluation of rates and other businesses will not see any change in their bills. There are businesses, particularly in the South, that will see an increase in bills. The increase will be dealt with by a system of transitional relief, which will be phased in gradually over a 5 year period. This transitional relief is worth £3.6 billion.
Reforms to Appeal Procedure
The DCLG is also consulting on the draft regulations to change the rules for rating appeals. Currently a ratepayer who wishes to challenge a rateable value proposes an alteration to the list. If the proposal is not agreed by the Valuation Officer, or a compromise reached, the decision may be appealed to the Valuation Tribunal.
Disputes regarding rateable values appearing in the April 2017 list will be subject to the new procedure, known as “check challenge appeal”. The proposals include a significant change in the power of the Valuation Tribunal to allow a ratepayer’s appeal.
It will not be enough to show that the Valuation Officer assessed the rateable value incorrectly. The number under appeal will have to be outside the range of "reasonable professional judgement".
If introduced, the businesses that need to challenge their revaluation assessment are now faced with a new, rigid appeal system – which will prevent small businesses with genuine concerns about their rateable values from being able to seek justice and redress.
If you want to check the rateable value of your property and calculate what your business rates liability is likely to be, please visit the following link: https://www.gov.uk/calculate-your-business-rates