2017 Rating Revaluation How best to navigate the ......Philip Hammonds View - What is to like about Business Rates •Simple methodology – Tax on rental value •Easy target –

Property Directors Forum

2017 Rating Revaluation

How best to navigate the forthcoming changes

Ian Tanner – Tanner Rose LLP

24th November 2016

tanner rose CHARTERED SURVEYORS

Capitals politicians join forces to fight massive business rates increase

Outrage over sharp rise In business rates

London companies to bear brunt of business rates overhaul Appeal proposals are barrier

to justice

Action needed on antiquated business rates

RATING NEWS HEADLINES


£28 bn ………. reasons why business rates will not go away


Philip Hammonds View - What is to like about Business Rates • Simple methodology – Tax on rental value

• Easy target – all business property

• Long established – precedent

• Easy to collect

• £28 bn tax take

• Automatic RPI increases

• Self adjusting mechanism to protect yield


Philip Hammonds View - What is not to like about Business Rates • Appeals – Cost of appeal management

• Appeals – over 1 million appeals registered against 2010 assessments

• Appeals – over 200,000 appeals outstanding

• Rateable Value ‘shrinkage’ (RV Loss)

• Revaluations – costly exercise

• Ratepayer Agents


Property Directors View - What is to like about Business Rates • Not much…..

• Predictable (mostly)

• Capable of appeal (eventually)

• Payable over 10/12 months (usually)


Property Directors View - What is not to like about Business Rates • Tax Rate too high

• Appeals take too long

• Annual RPI increases – even CPI would be better

• Complicated basis of charge – supplements

• Lack of transparency on rates valuations

• Infrequent Revaluations

• Only paid by ‘bricks and mortar’ businesses


What are Governments plans for Business Rates • Retain it

• Protect it – minimise ‘shrinkage’

• Make the appeals process more difficult

• Close ‘loopholes’ – anti ‘avoidance’

• Localism


Localism – Likely outcomes by 2020 Local Authorities will be permitted to decrease or increase business rates within their area. Mayoral Authorities and possibly Local Enterprise Partnerships will be able to levy a supplementary rate – like Crossrail in London Local Business Improvement Districts will be encouraged Lots of minor incentives impacting rates bills eg • Employment of local workforce • Development skills and apprenticeships • Encouragement of Green policies

Net Result – almost certainly increased cost for businesses


2017 Revaluation – Winners and Losers Increases • Central London • Utilities (Central List) • Prime Retail • Distribution • Retail Warehouses

Decreases • Everywhere apart from Central London • Secondary Retail • Factories/Warehouses


2017 Revaluation – Geographical changes


The 2017 Business Rate Revaluation

Table 1: Estimated percentage change in bills at 2017 revaluation

REGION CENTRAL RETAIL OFFICES INDUSTRY OTHER TOTAL

North East -16% -21% -9% -1% -11%

Yorkshire & Humber -11% -21% -9% -4% -10%

North West -15% -14% -12% 0% -10%

West Midlands -11% -16% -7% 1% -7%

East Midlands -5% -2% -7% 3% -3%

East -13% -7% -7% 2% -6%

South West -14% -10% -5% 1% -6%

South East -8% -3% -4% 6% -2%

London 14% 10% 4% 14% 11%

Central list 28% 28%

TOTAL 28% -5% 1% -6% 5% 0%

Rates Transition Rates transition is meant to smooth in large increases or decreases in rates charges following the Revaluation Regulations require there to be a transition scheme. • Self Financing • Central London is to finance reductions elsewhere • ‘Northern Powerhouse’ conundrum The Government have decided on Option 2 from their Consultation Paper • 45% maximum increase in 17/18* • 4.1% maximum decrease in 17/18* * For assessments in excess of RV £100,000

tanner rose

CHARTERED SURVEYORS

2017 Revaluation Utilities

Retailers

2010 £m 2017 £m %

British Telecom 158.5 714.9 350

Network Rail 325 450 38

London Underground 59 80 36

2010 £m 2017 £m %

Harrods 22.7 35.7 57

Selfridges 20.3 31 53

Bond Street 120-140

Oxford Street 70-90

Trafford Centre, Manchester No change

Intu Centre, Newcastle -15


2017 Revaluation - Impact Offices

% Change

City of London 25 to 35

Westminster -10 to 10

Canary Wharf 10

Kings Cross 60

Reading 80

Birmingham -10

Manchester -15


2017 Revaluation - Impact Warehouse/Distribution

% Change

London Gateway No change

Magna Park, Lutterworth 10

Accolade Park, Bristol 10


2017 Revaluation – Immediate Actions

Review Budgets – reflecting transitional scheme Check Facts – are floor areas and descriptions correct Incorrect Valuations – raise with Valuation Officer Trade or Organisation reviews Consider appeal/negotiation strategy post April 2017


2017 Revaluation – Appeals New 3 stage appeal system effective 1st April 2017 which the Government insists will be a marked improvement – but for whom? • Check - Facts - Rent, Floor Areas etc • Challenge - Why assessment is wrong • Appeal - Cost of appeal – direct to Valuation Tribunal Proposal to only allow appeals if the decision is outside the bounds of Reasonable Professional Judgement – whatever that is.


Rates Planning and Mitigation More holistic approach is becoming the norm. This will include – • Empty rates management • Part occupied relief • Portfolio Management • Appeals management and strategy • Rates payment • Historic audits • Outsourcing and procurement


2017 Revaluation – Role of Consultant Be counter cultural – the more the Government and the VO make it difficult to deal with rates the more innovative and creative you need to be. Objective is to work round the system with less focus on appeals Transparency – be open. The system will force out the facts. Offer them up front – with suitable caveats where necessary Seek to do the Valuation Officer’s job for them As the Valuation Officer is putting up barriers seek to break them down by consensus Apply a less adversarial strategy Go the ‘extra’ mile with the client, with the VO and with the ‘issue’.


Tanner Rose LLP 80 Cannon Street London EC4M 6HL

tanner rose

CHARTERED SURVEYORS

Documents

2017 Rating Revaluation How best to navigate the ......Philip Hammonds View - What is to like about Business Rates •Simple methodology – Tax on rental value •Easy target –