Keeping the rates down
The next revaluation of business premises for rating purposes will come into effect on 1 April 2000. This will determine the amount your company will pay in rates for the first five years of the new millennium. That date may seem along way off, but in fact that amount of rates your organisation will pay is based on the rent you are paying on 1 April 1998 - right now, in other words.
Arriving by post in the next few weeks will be a form from the Valuation Office or Assessor. The Valuation Office Agency is responsible for the preparation of the rating lists in England and Wales, as the Assessors are in Scotland.
They will be sending out forms of return requiring all business-rate payers to provide details of the rent or other tenure under which they occupy their property.
The information will be used to build up a library of rental evidence to enable the Valuation Office and the Assessors to prepare their rating lists.
Any rent agreed in open market during the six months prior to or following 1 April this year is likely to provide very useful evidence of the correct rateable value for the property from 1 April 2000 onwards.
The accurate completion of these forms is a statutory duty, and failure to comply can result in criminal prosecution.
The law and practice of rating is a technical area and a ratepayer might decide to enlist professional advice from a chartered surveyor. The only way in which a ratepayer can be sure that the individual providing advice is competent is to ensure that he/she is a member of the Royal Institution of Chartered Surveyors, with the letters FRICS or ARICS after the name, the Incorporated Society of Valuers and Auctioneers which use the letters FSVA or ASVA, or the Institute of Revenues, Rating and Valuation which has IRRV after the name.
A member of these professional bodies:
has qualifications which are acceptable to central and local government is requ ired by the ir professiona l body to abide by rules of conduct which are designed to protect the public from malpractice is required to hold adequate professional indemnity insurance.
To determine what will happen to an organisation's rate liability from April 1998, it is worth looking back at the last five years.
The level of rates payable today is based on rental values as at 1 April 1993.
The rental value of the property is known as its rateable value. The tax (known as the Uniform Business Rate) has been set, subject to the current transitional arrangements, for the rate year 1998/99 at £0.474 in England and Scotland and £0.429 in Wales. Small properties with a rateable value of under £15,000 in London or £10,000 elsewhere pay at the rate of £0.465 in England and Scotland and £0.42 in Wales.
The normal rate liability for a property is calculated by multiplying the rateable value by the Uniform Business Rate.
Property where the rate liability on 31 March 1995 was substantially higher or lower than that which would have been paid based upon the normal rate calculation, is subject to transitional rules which phase in these increases or decreases.
The maximum increase after adding 3.6 per cent inflation is 10 per cent for large properties, 7.5 per cent for small properties. These figures are cumulative, setting a maximum increase of 13.96 per cent for large properties and 11.14 per cent for small. The maximum fall, after adding inflation, for large properties, is 30 per cent and 35 per cent for small properties. The net effect is a fall of 27.48 per cent for large properties and 32.66 per cent for small ones.
An appeal can be lodged at any time in England and Wales against the rating assessment of a property. The rules in Scotland are different and an appeal could only be lodged up to the 31 December 1995, or within six months of a change of occupier, assessment or the physical state of the property.
As the ratepayer, you can appeal or retain an agent to advise you. It is important to be clear what it is that you are doing if you decide to appeal against your assessment. You are in effect saying that your property in its particular physical condition and environment would have let for less than the amount at which it is assessed on 1 April 1993.
A significant proportion of the most common classes of property are let in the open market and if the ratepayer agreed a rent of his property in April 1993 at above the current assessment, it would be very dangerous to appeal against the assessment, as the Valuation Officer, or Assessor in Scotland, might well decide that it would be appropriate to increase the assessment.
The ratepayer's rent may have been agreed at some time other than 1 April 1993, or the property might be owned freehold. The rental value for the majority of properties can however be deduced from rents agreed for other properties at or around 1 April 1993.
Where there is a physical change to a property - for example an extension or demolition - then the assessment will need to be adjusted accordingly. The Valuation Officer or Assessor will amend the assessment once the work is complete. It is, however, worth bearing in mind that if th e a l te r a t ion wo rk i s l ike ly to con t inu e fo r some while, a temporary reduction can sometimes be obtained in the assessment while the works are under way. The argument for this is that if the works had been under way on 1 April 1993 the tenant would have requested, and the landlord conceded, a lower rent. This is partly because some of the property was in the hands of builders and could not be used, and partly due to the noise, dust and disturbance which the works were causing.
Clearly, there is much that you as the ratepayer can do about your rate liability.
The time to act this time round is not at the beginning of the new millennium. It i s when the form o f re tu r n d rop s th roug h your letter box.
Charles Partridge TD BSc FRICS IRRV is a director of Lambert Smith Hampton, chair of the RICS rating and local taxation panel, and a past president of the Rating Surveyors Association, tel 0171 796 4000.