The coalition Government had promised a wide-ranging review of business rates but will it be business as usual under the new Conservative administration? Adam Bernstein reports

It is not hard to find arguments for the need to reform business rates. In May 2011, the St Albans and Harpenden Review reported that Springfield Pharmacy was to close because its business rates had risen from £19,000 to £24,000.

More recently, The Garden Pharmacy in London’s Covent Garden closed in March 2014 citing huge bills, most notably £600,000 a year in rent (which was a massive hike up from £410,000) and £230,000 a year in business rates on top of that.

The pharmacy had to make a profit of £2,273 a day just to cover its rent and rates. Reform is a topic close to the heart of retailers, with many of the view that, in the internet age, business rates should not be based purely on physical space.

Reports have noted that both Asos and Harrods have similar turnovers, £716m and £769m respectively, but have wildly differing business rates – £11.5m for Harrods and only £935,000 for Asos.

Wide-ranging review

The pre-election Government listened and the (then) Chief Secretary to the Treasury, Danny Alexander, announced “the most wide-ranging review of national business rates in a generation”. The stated intention, says Elizabeth Ruff, a partner in city law firm Fox Williams, was to examine the current structure, the current use of properties by businesses and review other countries’ systems to ensure that any recommended changes reflect the way that business has changed.

The Government review contained a series of questions to be considered and has invited comments from all interested parties such as ratepayers. (The review is still ongoing at tinyurl.com/nomzvp7 and the deadline for comments is June 12.)

Whether or not what will be delivered will make a difference is debatable, but from April 1 2015 the Government (among other things):

• Implemented an increase in the relief to all occupied retail properties with a rateable value of £50,000 or below to £1,500 (from £1,000) for the period to March 2016
• Increased by 100 per cent small business rate relief to March 31, 2016
• Capped the rise in the business rates multiplier at 2 per cent
• Extended transitional rate relief to support 16,000 small businesses facing significant increases due to the ending of this rate relief.

Of course any changes following the review will also take time to implement, so the question needs to be asked: what can firms do now to lower their business rates?

 

 

Launch a challenge?

According to Louise Hebborn, a partner at Stephensons Solicitors, business rates can be challenged through an official appeal process via the Government’s valuation office agency (VOA). She says that the four grounds to appeal are:

• The valuation was wrong
• The property has been changed and this should be reflected in the rateable value
• An alteration made to the valuation is wrong
• The property has been incorrectly split into more than one listing, or combined with others into a single listing.

There are various ways to challenge a rating and businesses should seek professional advice. Louise Hebborn makes the point that road improvements, road closures and upgrades to transport infrastructure can be disruptive and restrict access for deliveries and customers. Under current law, there is no compensation available for loss of trade.

For disruption over a sustained period, it may be possible to apply for a temporary reduction in the business rate, because the highway works may have affected the rental value of the premises over that period. “If a business is affected by local disruption, businesses should contact the VOA to lodge an appeal to have the rateable value of the property temporarily reduced for the period of the works,” she says. The VOA’s website is voa.gov.uk.

 

 

Look for guidance

There are other ways to seek to lower liability. If part of the building is empty and not being used, it can qualify for rate relief. Likewise, an empty property is exempt from paying rates for three months after it becomes vacant. Businesses that are experiencing hardship can contact their local authority, who have the power to provide rate relief for struggling companies. Business Debtline has a useful website (tinyurl.com/qc5khdh) that also offers guidance to those in financial difficulty.