With the Chancellor announcing business rates relief to support small retailers once again this topic has hit the headlines. But it's not just retailers who are being challenged by their rates bills in ever changing markets.
Business rates are one of the biggest expenses a business has to meet and are a bigger proportion of operating cost than ever which most businesses see this as a cost over which they have no control. However, there may be hidden opportunities and a number of ways you can reduce your rates bill.
While it is fairly simple to estimate your business rates by multiplying the rateable value by the correct 'multiplier' as set by central government, unless you have specialist knowledge of the complexities of different reliefs available you may well be missing a trick on cutting costs in this area.
There are currently 8 different reliefs which may or may not be available to your business. Some reliefs are applied automatically by your local council and others you have to apply for yourself. While some are fairly obvious, others such as hardship relief, exempted buildings and empty buildings relief place the onus on the business to prove eligibility and navigate a sometimes lengthy and arduous process. What can businesses do to mitigate this cost?
There are two areas of opportunity where your business rates may be reduced, ensuring that you are paying the correct rates based on your individual circumstances:
Challenging Rateable Value
- Rateable values can be challenged.
- Billing analysis to identify errors.
All businesses are entitled to challenge the rateable value set by the Valuation Office Agency (VOA). This can be done through a benchmarking exercise, for example looking at actual rents and rents on comparable or adjoining properties as there is this close correlation with rents and rateable value.
Businesses may be entitled to reduced assessments if it can be proved that there has been a change of circumstances affecting the property or if there are works going on that are affecting the enjoyment or usage of the property. Rates can be reassessed, for instance, if construction works nearby are causing noise, access issues, damage to property, loss of usage of parking facilities and so on. These can be reflected as temporary adjustments with savings of as much as 20%. Billing Analysis
As with any billing system, errors and inaccuracies sometimes do occur, so it is often a worthwhile exercise just to interrogate the existing data. Is the actual bill correct: have the correct dates been applied, are appropriate reliefs reflected e.g. empty/transitional reliefs etc. An audit service from a specialist should include error-checking based on expert knowledge with crosschecks being performed against bills and information on leases etc. When is it worth considering a business rates audit?
There are a number of situations where it can be useful to take specialist advice on your business rates. Here are some of the key trigger points where you might consider seeking specialist advice:
Example results following rates reviews for PEPCO clients
- Property Acquisition – or indeed pre acquisition – where it can form part of the business comparisons for options on relocation etc. Analysis and benchmarking of costs can help make an informed decision on your business property strategy.
- Material Change Issues – environmental changes e.g. building works.
- Empty Rates – where you have vacated any or part of a property, or vacated in whole – it is worth remembering you do not have to vacate an entire property to obtain a relief. You may be doing a refurbishment and have areas of a property being worked on in stages which could allow you to avoid rates on the percentage of the property not in use.
- Technology business Head Office Relocation and consolidation of offices:
- 25% savings as well as rebates on £1m budget through VOA renegotiation.
- Hospitality business:
- Reassessment of business undertakings.
- 50% reduction in overall savings (backdated 5 years).
Where do I start with a rates review?
- Transport business:
- Threat of rates increase from RV £44,600 to RV £240,000 plus a supplementary bill of £86,000.
- Negotiated 100% reduction on RV based on property status.
- Supplementary bill made void plus a refund of £30k.
If you believe you may have a case for a rates reduction we would always recommend seeking advice from a qualified rating professional. Beware however the "rates experts" calling up with the promise of reducing your business rates; always make sure you are working with a RICS approved consultant.
A simple audit is a fairly quick process, typically looking at the rateable value to see if there are grounds for appeal and checking that the bills are correct. Many businesses will have these done on an annual basis for reassurance that nothing has been missed.
Another benefit of taking specialist advice is to avoid entering a process which is unlikely to bring a worthwhile result. A business may have a number of relatively small properties and a specialist will be able to look at a property portfolio and identify quite quickly which ones are worth looking at. This creates efficiencies in the process as businesses can then focus attention and resource on the area of opportunity. Process of Rates Appeal
There can be 3 parts to a rates appeal:
1. Check - here the facts are ratified between parties.
2. Challenge - the business instigates a challenge.
3. Appeal - if agreement not reached above it can move to 3rd party arbitration.
The appeal process to challenge rateable values can be cumbersome, no doubt designed this way to put people off, so businesses should be prepared for some delay. It can take up to 4 months to process the Check and then up to another 12 months to process the Challenge. But as mentioned above the results can be very worthwhile!
On a final note, it is important to remember that business rates that are challenged can go up as well as down. An expert opinion is useful to identify if amounts being questioned are borderline as things can sometimes be best left alone; as with all such things there is a possibility that a challenge might result in a worse position.
PEPCO partner with RICS approved property specialists with over 40 years' experience in this area, please get in touch with Mark Russell, 0203 008 7585 or firstname.lastname@example.org
, if you would like to discuss a free review to identify any areas for savings around business rates.