Rating – The Road To Revaluation: Reliefs

Whilst the government argues that the 2017 revaluation ensures that all businesses are getting a fair deal, with the majority of businesses across the country being "unaffected or better off with the changes", it has been well publicised that many businesses are facing sharp rises in rateable value (RV) when the rating list goes live on 1 April 2017.

With such sharp rises expected, this instalment of Dentons' business rates series explores the main reliefs open to ratepayers.

Empty properties

As a general rule, you don't pay business rates on properties that are empty for three months. Industrial properties, however, benefit from an additional three-month period and the following benefit from relief until they are occupied again:

listed buildings; properties with an RV under £2,900; properties owned by charities and used for charitable purposes; and community amateur sports clubs, provided that the next use of the property will be that of a sports club. To obtain the relief, the property must have previously been occupied for at least 42 days and rates must have been paid for that period.

Transitional relief

Transitional relief limits how much your rates bill can change each year as a result of revaluation. The relief phases the changes to your bill gradually, to soften the impact of revaluation. The limits apply where your rates increase or decrease by more than a certain amount linked to geographical location and sector.

Transitional relief is self-funded. The cost of any upward transition (i.e. for ratepayers whose bills increase) is funded by ratepayers whose bills decrease as a result of revaluation. The table below outlines the transitional caps from 1 April 20171.

So, whilst the government may have introduced a more generous upward relief scheme, small businesses with a reduced 2017 RV are being significantly penalised, having to subsidise these increases as a result of downward transition.

Tim Harrison, Partner at Cushman & Wakefield, comments: "What seems to have been missed by some commentators is the unfair system of downward transition that has also been put in place again. Many ratepayers were hoping to benefit from the revaluation as a result of their RVs going down but will instead be required to meet the cost of upward transition for those ratepayers whose RVs have gone up. For example, for a large business with an RV over £100,000 that is expecting a fall in liability, this will be restricted to a fall of only 4.1 per cent...