Newsletter December 2013: Many property overheads such as rent are known and fixed, at least for a certain period. Business rates are an unfixed and rising cost.

The rating system has recently been hitting the headlines for all the wrong reasons. A politically sensitive issue, solutions to satisfy aggrieved ratepayers will be a hard task indeed. Business rates raise a huge amount of revenue, and therefore any mitigation to the rates payable will need to be replaced by alternative revenue. In the last financial year business rates raised £26 billion for the Treasury, compared with £40 billion from corporation tax. Business rates are a difficult tax to mitigate – even the likes of Google and Starbucks have to ‘cough up’.

Rating revaluations reset both Rateable Values and the UBR – Uniform Business Rate (equivalent to rate in the £). Since 1990, these have taken place every five years. However, the 2015 revaluation has been deferred to 2017 further adding to the ‘north – south divide’. The UBR is increased annually in line with RPI from the preceding September. Though capped to RPI, the increase adopted usually mirrors RPI. For April 2014, the UBR is anticipated to increase by 3.15%. RPI increases since 2010/11 equate to a staggering 17.2%.

Ed Miliband’s proposed business rates freeze is no more than ‘tinkering at the edges’, and would only be applied to small businesses – those with rateable values less than £50,000. This will be paid for by all businesses through reversing a planned for cut in corporation tax from 21% to 20%. This maybe a case of something is better than nothing. However, nothing short of a wholesale review of the system is likely to satisfy the likes of the CBI and the British Retail Consortium.

So what can be done to mitigate rates liabilities?

Small businesses – Ratepayers whose property has a rateable value below £12,000 pay a marginally lower UBR, and until April 2014 benefit from a sliding scale of relief so that a rateable value of £6,000 or less results currently in a zero liability. However, there is no guarantee that the small business rate relief scheme will be extended beyond April 2014. Those small businesses benefitting from this relief should be budgeting for their original liabilities to be reinstated from next April, barring any Budget announcement.

Appeals can still be made against the rateable value. However, backlogs at the Valuation Office mean that some appeals are taking up to two years to be dealt with. In cases where reductions are fully justified, ratepayers find themselves having to pay their original liability until such time as the rateable value is reduced when overpayments are refunded.

To discover whether there is any merit in challenging your rateable value, please contact Allen Evans