Roche Chartered Surveyors

56 Thorpe Road, Norwich,
Norfolk, NR1 1RY

Tel: 01603 619876
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Briefing Note on Business Rates - July  2016

Briefing Note on Business Rates - July 2016

The Background .... Business rates are a tax on the occupation of non-domestic property ..... 

September 2016

Briefing Note on Business Rates - July 2016

The Background:

  • Business rates are a tax on the occupation of non-domestic property.
  • Since 1.4.1990 a rating list has been prepared on a 5 yearly basis except for the most recent revaluation which was delayed from 1.4.2015 to 1.4 .2017.
  • The rateable value of each property is assessed by the Valuation Office Agency (VOA) and it is an estimate of the annual rent that would be paid for the property at a fixed date, which has always been 2 years prior to the beginning of the list, thus the most recent revaluation is effective from 1.4.2017 but with the actual valuation date being 1.4.2015. Summary valuations will be available on the VOA Website on 30.9.16.
  • Rating assessments can be altered subsequently to any revaluation either to reflect changes in the property or if a valuation is appealed against.
  • Local Authorities apply a multiplier to obtain the actual rates payable. This is known as the Uniformed Business Rate (UBR). There has been and will continue to be, a differential between the UBR as applied to the rateable values of small and larger properties.

Changes with effect from 1 April 2017:

  • With effect from 1.4.2017, small businesses who occupy premises with a rateable value of below £12,000 (up from £6,000) will pay no business rates at all. This is known as the small business rates relief scheme (SBRR). It is estimated, over 600,000 businesses will benefit from this change.
  • There is tapered relief which will be implemented for rateable values between £12,000 and £15,000.
  • With effect from 1 April 2017 the lower UBR for smaller properties will be applied to those having a rateable value of below £51,000. Previously the upper limit was £18,000, thus taking probably another 250,000 smaller properties out of the higher rate UBR multiplier.
  • It is estimated that over half of all business rate payers will see a fall in their business rates or will not pay any business rates at all from 1 April 2017.
  • All of this may be subject to transitional relief.
  • UBR rates are increased with inflation with the current multiplier being in line with the Retail Price Index (RPI). However from 1 April 2020 this will move to the Consumer Price Index (CPI). This will bring business rates in line with a main measure of inflation and it is estimated businesses will save £370M in the first year alone.
  • However the downside is, this saving will have to be paid for elsewhere and it is estimated the UBR for properties having a rateable value in excess of £51,000 will increase from 1.4.2017.
  • It is also suggested the Government may introduce 3 yearly revaluations of premises which if this is implemented will mean the next revaluation after 2017 will be with effect from 1 April 2020, thereby effectively restoring the previously anticipated revaluation date of 2020, being 5 years on from 2015. 
  • The provisional UBR for the 16-17 year should be issued in December 16 with the actual UBR set in early February 17.

Rating Reliefs

  • SBRR is applicable if only one property is occupied and the rateable value is less than £12,000. Please see above. This relief has to be applied for on an annual basis.
  • If an occupant occupies multiple properties, each may be eligible for a small business rates relief if the rateable value of each of the other properties is less than £2,600. The rateable values of these properties are added together and relief applied to the main property.

Charitable Rate Relief

  • If a property is used for charitable purposes, an application can be made for relief of at least 80% but this is at the discretion of the billing authority. Eligible users include not only charities but also amateur community sports clubs. The building must be wholly or mainly used for charitable purposes.

Enterprise Zone Relief

  • Up to 100% business rate relief can be achieved, again at the discretion of the Billing Authority, up to a maximum of £275,000 over a 5 year period.
  • Enterprise zones in East Anglia include:
    • Norwich Research Park, Norfolk
    • Suffolk Business Park, Bury St Edmunds
    • Scottow Enterprise Park, Coltishall 
    • Egmere Business Zone, Nr Wells
    • Greater Ipswich, Suffolk
      • Futura Business Park
      • Princes Street Office District
      • Sproughton Enterprise Park
      • Waterfront Island
    • Nar Ouse Business Park, King's Lynn, Norfolk
    • Stowmarket Enterprise Park, Suffolk
    • Great Yarmouth and Lowestoft Enterprise Zone

Retail Relief

  • Some Local Authorities offer rate relief up to a £1,000 for businesses occupying a retail property with a rateable value of up to £50,000. Eligibility parameters are the premises must be used as a shop, restaurant, café or drinking establishment and the relevant Local Authority should be contacted.
  • Breckland Council are operating their own scheme for Dereham for 12 mths and up to 80% relief may be available.

Empty Buildings Relief (EBR) (aThis element is subject to review)

  • All commercial properties can receive EBR. All commercial properties can obtain EBR for a minimum of 3 months and this period can be extended, in the case of industrial/warehouse premises for a further 3 months. In addition there are premises which are exempt until reoccupied and these are as follows: 

 

  •  
    • Listed Buildings
    • Buildings with the rateable value of less than £2,600.
    • Properties owned by charities and which are likely to be next used for charitable use.
    • Community Amateur Sports Club Buildings, if the building is likely to be used as a sports club.

 

  • Whilst changes of ownership do not trigger a fresh 3 or 6 months exemption, as the exemption applies to the property and not the person paying the rates, there is some relief from this by way of short term occupation of the property of at least 42 days and this can be organised on a cyclical basis.  It is advisable to inform the Local Billing Authority each stage of change.

The property can be removed from the Local Rating list if it is not capable of beneficial occupation, that is as a broad brush approach, the building is in a very poor condition and not could not be economically repaired or is undergoing major renovation works or if the property is demolished or undergoing redevelopment.

  • It is worthy of note, none of these reliefs apply until the owner occupier applies to the VOA for the property to be removed.

This information may be subject to change at any time so please check all information before applying it to your situation.

Current Issues

  • Rating liability whilst ongoing building works are being undertaken now falls to be decided having regard to the Court of Appeal case of Newbiggin (VO) v SJ & J Monk 2015 where the Court has ruled that rates will be payable unless a vacant building is beyond economic repair. 
  • Of significance, the case states that "the mere fact that the ratepayer intends to produce at some future date a building which will be different in kind from that which exists on the valuation date cannot determine whether or not the hereditament can or cannot be put into a state of reasonable repair at economic cost on the valuation date itself." 

  • The current authority for the economic test is now Thomas & Davies (Merthyr Tydfil) Ltd v Susan Jennifer Denly (VO) Upper Tribunal (Lands Chamber).

  • If works of refurbishment are being undertaken, this suggests, the works are economic & therefore it is unlikely the VOA will delete/reduce the assessment to nil.

  • The matter is to be put before the  Supreme Court later this year.  Pending this, it is advised appeals are submitted on the grounds of Material Change in Circumstance.  The appeal must be made during the period of the works.

 

  • The Woolway case concerned whether the 2nd and 6th floors of Tower Bridge House in London formed one hereditament or two.  The Supreme Court decided following a careful examination of established legal principles that each floor formed its own hereditament.  It set out clear tests for establishing the hereditament. 

     

    • Geographic test - are the premises evidentially a single unity on plan, horizontally and/or vertically?  Are they separated by a common area or are they connected directly?

    • Functional Test - This is likely to be an exceptional situation whereby the use of one is necessary to the effectual enjoyment of the other.

    • Occupation - There must be actual occupation, exclusive to the possessor, possession must be of value to the possessor and possession must not be for a transient period.

    • Functionality - Whether or not the various uses within the assessment are so very different as to enable 2 assessments to be made eg. York Union Case - York Railway Station rated as one, but comprised station and hotel, thus 2 different uses.

    • Capable of Separate ~Definition - The property must be able to be defined.

       

September 2016

Norwich - 28 London Street, NR2 1LD

Norwich - 28 London Street, NR2 1LD

Roche Retail advise private clients in the purchase of 28 London Street ........   

May 2016

Norwich - 28 London Street, NR2 1LD

Roche Retail have advised private clients in connection with the purchase of the freehold investment of 28 London Street in Norwich where the principal tenant is White Stuff that are paying a rent of £105,000 per annum exclusive.

The property is situated at the junction of London Street and Castle Street and represents a 100% prime position for this increasingly popular location for fashion retailers where Jigsaw, Cath Kidston, Crew Clothing, Gap, Joules, Dr Martens and Moda in Pelle are all represented.

Adrian Fennell, the Partner responsible for the retail department commented that 'our client was delighted to secure this prime retail investment where there is strong rental growth anticipated in a city centre that has been ranked as the 2nd Hottest Retail Location in the UK (CACI 2015).

May 2016

Norwich - 11/17 Bank Plain, NR2 4SF - A trio of new lettings

Norwich - 11/17 Bank Plain, NR2 4SF - A trio of new lettings

Roche Retail complete three new shop lettings on Bank Street to estate agents ......

May 2016

Norwich - 11/17 Bank Plain, NR2 4SF - A trio of new lettings

Roche Retail have recently completed three new shop lettings on Bank Street to estate agents, Century 21 and BMA Estates, along with financial services firm Charles Derby Group.

The three shops are all arranged over ground floor only and range in size  between 718 sq ft and 981 sq ft, totalling 2,666 sq ft. All the occupiers took new 5 year leases.

Lloyd Perry of Roche Retail commented that "This is encouraging news for Norwich's residential market, demonstrating its buoyancy and establishes a concentration of residential estate agents and related services within close proximity to each other."

Roche have strong interest in the remaining unit at 15 Bank Plain that comprises 967 sq ft.

March 2016

 

May 2016

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RATE PAYERS

RATE PAYERS

Hints and tips in the run-up to the revaluation ......   

February 2016

RATE PAYERS

A quick history lesson! Since 1990, Business Rates Revaluations have taken place at regular intervals, which, up until the most recent revaluation, were carried out every 5 years. The current revaluation date is set for the 1 April 2017, but keeping to sensible tradition, there has always been a preceding valuation date, usually 2 years before, called the Antecedent Valuation Date (AVD). Therefore, the prima facie evidence for the 2017 rating list will be market rents set as at 1 April 2015, nearly a year ago.  The valuation is tempered by any relevant circumstances at the actual valuation date itself of 1.4.17, such as the physical layout and use, etc.

So in advance of this revaluation, the first consequence of it is, that ratepayers are likely to see an increase in requests for information from the Valuation Office Agency (VOA) in the "forms of return". These forms have to be completed by law and ask questions which are relevant such as the rent payable, the date the rent was set, and why it was set, detailed lease information etc.  It is worth reiterating these forms must be completed by either the ratepayer or their agent.

The second consequence for ratepayers is that forecasting your actual rates payable beyond the revaluation date of 1 April 2017 is going to be very difficult. This is for the following main reasons:

  • Business Rates Payable normally increase annually in line with the RPI index.
  • However, with a revaluation, the rateable value is likely to change and the new level of Uniform Business Rate (UBR) is to be set. The UBR is the multiplier to be applied to the rateable value.

  • Transitional adjustments, which are the phasing in of new rateable values, may or may not be put in place.

The final major consequence, is that rate payers are highly likely to see a fall in rateable values, because of the fall in rental values in many sectors and parts of the country, especially in East Anglia, due to the economic recession, since the 2010 list was established using 2008 rents. Unfortunately, rates payable cannot be expected to fall in exactly the same way as the rateable values as the Government has a duty to maintain revenue and therefore the UBR is likely to offset substantive overall falls.  This situation is highly likely to be exacerbated by the use of transitional reliefs.  The exception to this scenario is in London where increased rateable values and increased UBR multiplier could result in a major effect on rates payable for those businesses located in the capital.

How can this affect the actual market rents payable now and in the future?  For example retail rental values in Southwold have increased fourfold and in Great Yarmouth they have halved during the life of the current list.  Over the life of the next list, which is likely to be for a period of 5 years, the amount of money available to tenants to pay for outgoings will remain fairly constant so monies available for rent will decrease in Southwold and increase in Great Yarmouth, thus this may have a direct effect on rental values and this should be factored into investment decisions going forward.

Publication dates of the new rateable values is likely to be September 2016 and from the start of this year, the VOA will need to value some 1.8 million non-domestic properties having a total value in the local rating lists of more than £57 billion.

One thing is hopefully certain, the principals of an appeal against any rating assessment will remain and relate to changes or inaccuracies in actual use, size, unique physical factors affecting premises and mode of occupation. 

 

Jackie Crisp

February 2016

Business Rates Update

Business Rates Update

April 1st 2015 is not just April Fool's Day ..... it is also the actual valuation date for the 2017 Business Rating ...

March 2015

Business Rates Update

April 1st 2015 is not just April Fool's Day .....  it is also the actual valuation date for the 2017 Business Rating Revaluation.  Although the new rating list will not come into force until 1st April 2017, the revised values will be based on what will then be historic values as of this April.  This ensures all properties share a common valuation date.

The basis for the revaluation will be market rental information pertinent to April 2015.  It is acknowledged not all property will have a new rent established on that day as:

The premises may be occupied by the owner, rather than rented, or  

  • There may be vacant accommodation, or

  • The passing rent may have been established at either an earlier or later date by way of a new letting, rent review or lease renewal.

However, in the majority of cases where premises have a contemporary rent, the rental evidence can be distilled into a rate per square metre, taking into account any relevant issues including the surrounding built environment, the physical characteristics of the premises, the lease terms agreed and any other pertinent factors. 

The Valuation Office Agency (VOA) will consider all the evidence that it has collated to create a tone of values specific to an area that relate to premises of the same use, with the tone being adjusted to apply to each property, to reflect its unique characteristics.

Property occupiers may be asked to provide information on their property by the VOA, and should do so as it is a statutory obligation!

So, what this means is, any occupier who agrees a rent review or lease renewal or who acquires a new lease on premises in line with market conditions  on or around 1st April this year,  may have a good indication of the new rateable value which will apply in 2017.  There is therefore extra incentive to make sure the rent is agreed at an appropriate level - to do otherwise might be doubly foolish

Jackie Crisp, FRICS, Partner, Roche Chartered Surveyors

March 2015

A11 dualling - the impact on commercial property

A11 dualling - the impact on commercial property

Norwich will no longer be the largest city that is not connected to the motorway network via a dual carriageway  ......

December 2014

A11 dualling - the impact on commercial property

The long-suffering business community and residents of East Anglia that use the A11 as a means of connecting with the wider world, can finally look forward to the imminent opening of the last dual carriageway section of this vital trunk road.

Norwich will no longer be the largest city that is not connected to the motorway network via a dual carriageway.  Journey times for people and goods will be reduced whilst predictability of arrival and delivery times will be dramatically improved.  But what impact will this have on commercial property in East Anglia?

A sudden improvement in accessibility can change distribution patterns.  The overall improvement in the accessibility of Norwich will undoubtedly enhance the City's appeal as a business location.  However for distribution, it will now be easier for companies to cover the whole of East Anglia from, say, Thetford or Bury St Edmunds which are geographically more central.  My firm is already advising logistics clients that are reviewing their operations in this way.  Therefore, a boost for warehousing in the centre of the region.

Manufacturers will find it easier to get goods to and from East Anglia.  This should reduce costs, improve service and therefore competitiveness.  Logically, I expect to see improved demand for industrial units in Norfolk and Suffolk along the A11. 

For retailers, critical considerations are catchment areas and drive-times.  Therefore the big regional centres of Cambridge and Norwich will be further boosted by being more accessible from the centre of the region, possibly to the disadvantage of smaller towns between the main cities.  Better communications within the region might also make East Anglia more attractive to big retailers such as IKEA and Decathlon as more households fall within an acceptable drive-time.

As far as offices are concerned, Norwich will be significantly enhanced, enabling it to challenge Cambridge with more credibility.  With prime office rents exceeding £30 per square foot, arguably Cambridge has become over-heated.  Norwich is roughly half this level and therefore well placed to take up the pressure.  Norwich Research Park's competitive prospects are similarly enhanced.

It will take time for the consequences of this significant improvement in our road infrastructure to work through the economy and into the commercial property market.  The overall impact will undoubtedly be positive but as improved accessibility opens up new markets, there will be greater challenges for businesses in some locations although I expect the over-riding impact to be extremely positive.

 by James Allen, Senior Partner, Roche Chartered Surveyors, Norwich 

 

December 2014

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