The Government has made its first formal announcement regarding the impact of next year’s business rates revaluation. Local Government Minister, Marcus Jones, has announced that the Uniform Business Rate multiplier in England is expected to fall next year from 49.7p to 48.0p for larger businesses, and from 48.4p to 46.7p for smaller businesses. There are no announcements yet regarding the UBR multipliers for Wales or Scotland. The fall in the multiplier is to ensure that the yield from business rates remains the same after the revaluation as before. On the face of it a fall of 1.7p, or about 3.5%, suggest that the total rateable value across the whole of England will rise by 3.5% as a result of the revaluation. However, as is often the case with business rates, things may not be quite as simple as this. The Government is entitle to adjust the multiplier also to reflect RPI inflation (currently about 1.8%) and for “loss on appeal” which has in the past been an adjustment in the region of 4%. If the Minister’s figure factors these in, then it could imply that the total rateable value across the country has risen by nearly 10%, which many would regard as a surprising outcome.
We will not have to wait long to find the new rateable values to come into effect from 1 April 2017 alongside the new multiplier, because the values for individual properties in England and Wales will be published on Friday 30 September. The preliminary figures for England published as part of the Minister’s statement show that aggregate rateable values for the retail and industrial sectors have fallen; and those for the office sector, the central rating list (which comprises mainly utilities properties) and the “other classes” sector (comprising all remaining properties) have risen. These changes will mean that the office and “other” properties sectors will face increased rates bills, whilst the retail and industrial sectors, taken as a whole, will see reductions.
The changes in liability will also be seen regionally, and the Minister’s statement indicates that he expects overall rate liability in London to rise by 11%, whilst all other regions will show falls, with the highest falls being in the North East at -11% and the North West and Yorkshire & Humberside, both at -10%. This mirrors expectations that rates liabilities in London will rise as a consequence of the very strong property market in the capital, particularly in central London. There will no doubt be a great deal of press comment about the impact on London, especially in the light of the other significant part of the Minister’s announcements.
The other important part of the Minister’s statement was the announcement of a scheme of transitional adjustments designed to phase in the new liabilities. He has announced a consultation about the proposed scheme, setting out two alternative proposals. Both schemes run for a five-year period, the full life of the new rating lists, and both would limit maximum percentage changes (upwards or downwards) to rate liability on a year-by-year basis. The Government’s preferred option would limit increases in year one the 2017-18 rate year) to a real terms maximum of 5% for small properties, 12.5% for medium properties, and a whopping 45% for large properties. This level of potential increase for large properties will be very unwelcome news for those affected by significant increases in rate liability. In order to pay for these limits on increases, the preferred scheme also proposes maximum limits for real terms reductions in rates bills. The limits for reductions in year one (2017-18) would be 20% for small properties, 10% for medium properties and 4.1% for large properties. Again, the restriction will be an unwelcome one for larger properties that might otherwise expect a significant reduction in rates bills.
We will be providing more detail of these changes as the information becomes available, and it will be interesting to see the detail of the new rateable values when these are published. Publication of these will be on the Valuation Office Agency website. The VOA has, rather surprisingly, chosen this moment to launch a new web platform, which has experienced some difficulties, and will no doubt be put under further strain as people try to view the new values.
The package of rate reliefs for smaller businesses that was announced in the Budget will be implemented from 1 April 2017 and these, taken with the fall in the multiplier and a generous scheme of transitional adjustments for smaller properties, will represent good news for smaller businesses. To pay for that the Government is ramping up the business rates burden on larger businesses and larger properties. The administration knows where the voters are and seems unconcerned about the fact that the UK already has the highest level of property taxes, measured as a proportion of GDP, of any OECD nation.