A statutory instrument has been laid before Parliament setting the valuation date for the 2017 business rates revaluation in England as 1 April 2015. The Rating Lists (Valuation Date) (England) Order (Statutory Instrument 2014 No 2841 will come into force on 21 November 2014 – effectively firing the starting gun for the 2017 business rates revaluation.
Since the current business rates regime was introduced in 1990, business rates revaluation have been given a set, antecedent, valuation date. This is the date by reference to which values are to be set. The date has normally been set two years in advance of the date on which the valuations are to come into force so as to allow time to gather evidence of rents and values and to prepare valuations. The current rating lists came into force on 1 April 2010 and are based on a valuation date of 1 April 2008.
There was due to have been a business rates revaluation in 2015, which was expected to have had a valuation date of 1 April 2013. However this revaluation was postponed by Ministers in England under legislation contained in the Growth and Infrastructure Act 2013. Ministers in Wales and Scotland subsequently followed suit, although Northern Ireland is going ahead with a 2015 business rates revaluation. The postponement of the revaluation in England was for a two year period – until 1 April 2017. At the time, there was considerable criticism of the postponement because this left values based on a date in 2008 when economic circumstances were very different to those at present.
Assuming the order is not opposed in parliament this will mean that new rating lists will come into force on 1 April 2017 based on values at 1 April 2015. Existing rateable values will remain in force until then. Ministers in Wales and Scotland are expected, but not required, to set the same valuation date for those countries.
The first practical consequence for taxpayers is that they are likely to see an increase in the issue of “forms of return” from the Valuation Office Agency (VOA) seeking tenure, and other details, of their properties. This is because rents agreed now and over the next few months are likely to provide strong evidence of the new level of rateable values to come into force in 2017.
A second consequence for taxpayers is that forecasting rate liabilities beyond 1 April 2017 becomes very difficult. Normally, business rates liabilities increase annually in line with Retail Prices Index inflation – see our recent news item on the September RPI figures. However, in a revaluation year, everything changes; new rateable values come into force, a new level of Uniform Business Rate (UBR) is set, and a new scheme of “transitional adjustments” comes into force.
Ratepayers may expect many rateable values to fall in 2017, because of the fall in rental values since 2008 as a result of the recession. But it is important to remember that rate liabilities may not change in the same way as rateable values. This is, firstly, because the legislation allows government to increase the UBR multiplier to offset any overall fall in rateable values so as to maintain the government’s aggregate yield from the tax and, secondly, because transitional adjustments may mean that reduced liabilities are phased in over a number of years.
The advice to ratepayers must be to consider very carefully rents that you agree now and over the next months, and to be careful about budgeting for rate liabilities from 2017 onwards.
There will be more news items about the 2017 rating revaluation as we progress towards it.