In the interest of helping you start the new year off right, we wanted to provide you with the big numbers and takeaways concerning the impact last year had on business rates, what’s happening in the year ahead, and share some of the strangest notions people have about how business rates works so you can avoid these mistakes.

The 2023 tax year started with an average 27% increase in Rateable Value for premises in the industrial sector (like warehouses). While the impact of that was lessened through Transitional Relief, you need to beware – the size of that ‘discount’ reduces every year, so you will be paying more come April 2024, and even more in April 2025. For help figuring out how much more, we’ve written a more detailed article about that on our website.

If you’re thinking that you had better start an appeal as a result, the VOA revealed that 39% of the Checks (first stage appeals) in the first half of last year were as yet unresolved – that’s a backlog of over 12,000 cases as of September 2023, and no doubt it’s more than that now. This can be a long and complicated process to manage by yourself.

That complexity is why misunderstandings abound. Here’s a short list, compiled by our surveyors, of the many misconceptions clients have revealed during our site visits:

1. “I’ve turned that office into storage space, so it should be valued lower”
This is the one our surveyors hear all the time. Think of it this way – if you left the premises, what would the next occupant assume that space was? If the answer is ‘office’ then that’s what it’ll be valued as now, whatever you use it for.

2. “If I take the roof off a building, that takes it out of the rates.”
This misunderstanding has been around for about 15 years thanks to a very brief loophole which has long since closed. Doing this is a big risk because the VOA assesses on a discretionary case-by-case basis, factoring in the ratios between RV and cost to reinstate the structure, and it rarely results in a reduction in the rates bill.

3. “My neighbour got a relief from the Council and I didn’t – that can’t be right!”
Actually it can. The reason is that a lot of council’s don’t have set criteria for their ‘Discretionary Reliefs’ and decide on a case-by-case basis. Even nationwide schemes where the guidelines are set can be interpreted in different ways by different councils.

4. “I heard that toilets are supposed to be rates free.”
In some buildings this is true, but in the industrial premises common to this sector, the Valuation Office uses a Gross Internal Area (GIA) approach. In other words, every room in the building has to be accounted for and rated accordingly.

5. “I split my premises exactly in half, but now each part has more than half the original RV!”
The value per square metre (£m²) which makes up your RV works on a ‘bulk buy’-style formula – the larger the premises, the lower the £m2. The reverse is also true, so a 50/50 split in the building will cause the £m² to go up.

If you were hit with a big RV increase in April 2023 and would like to do something about it, Commercial Property Advisors is only a free phone call away, or get in touch through our website for Business Rates reduction strategies that actually work.

Source: commercial property advisors