Rating – the road to revaluation: Valuation

• Published date: 02 March 2017
• Law Firm: Dentons
• Author: Bryan Johnston,Kirstin Dunn,Thomas Nolan,Anna Williamson

Valuation

The front pages of the national press have been headlining a key message: the revaluation and proposed reforms are taking businesses on a path they are resistant to going down. In view of a plethora of hard cases, controversy continues to grow and fundamental questions are being asked as to the actual need for a local tax based on property values. In balancing the requirement for revenue with the legitimate concerns of ratepayers, the press is inundated with calls for the reform of the business rates system, a complete overhaul to the proposed regulations on the appeals process and a change in the multiplier used for calculating the rateable value. With this much controversy, should the rating system just be scrapped?

Jerry Schurder, Head of Business Rates at Gerald Eve, has commented: "The frequently heard calls for the abolition of the rating system are misplaced. A local property tax sits appropriately within the basket of business taxes available to government. The problem is that the burden of business rates in the UK with a tax rate of about 50 per cent is too high and the system doesn't respond quickly enough to changing economic circumstances. More frequent revaluations would remove the volatility in rates bills, eliminate the need for the complex and unfair transitional arrangements and lead to a more acceptable and understandable tax."

So how are business rates currently calculated?

Let's take this back to basics... Which properties attract business rates?

Non-domestic property, excluding agricultural properties, churches and certain properties used for the training and welfare of disabled people, attracts business rates. The technical term for the unit of property attracting rates liability is a hereditament. Unhelpfully, there is not a statutory, or indeed succinct, common law definition.

A hereditament was commonly determined by the extent of a ratepayer's occupation. One occupier = one hereditament. However, as set out earlier in the series, following Woolway v. Mazars, the Valuation Office Agency (VOA) has changed the way it values multi-floor occupiers in the same building. The VOA's policy is to create two (or more) separate hereditaments, where there would previously have been only one. This clear change in the way in which hereditaments are being determined will be reflected in the 2017 revaluation.

The VOA has also in recent years determined that ATM machines¹ are separate hereditaments from the buildings...