how to appeal against business rates

Changes are underway which will affect the business rate paid by companies over the next five years. The Business Rate is a tax on the occupation of commercial property and affects all businesses large or small in England and Wales. Rateable values are reviewed every five years, the 2005 revaluation came into effect on 1st April 2005.

The rateable value of a property is based on an estimate of the rental value of premises in the open market two years prior to the revaluation taking effect. Therefore the 2005 revaluation is based on the rental figures from 1st April 2003. The revaluation is intended to realign liabilities with changes in property values.

Businesses will have received details of the new rateable values from The Valuation Office. An initial appraisal of the valuations in England shows that there will be an average increase on Revaluation of 17.9% but this figure masks a wide variation in movements between different properties; some have substantial increases and others show significant reductions.

Due to the complexity of the rating system, few companies will have the knowledge necessary to understand the implications of the valuations. What businesses really need to know is how the changes will affect the rates they pay over the next five years.

The purpose of the rating revaluation is to redress the balance of taxation contributions between companies, in line with relative changes in rental value. It will provide some link between the tax charge and ability
to pay. The system relies on the appeals process to correct inevitable inaccuracies.

The Appeals Process
Occupiers, owners or other interested parties have been able to appeal the valuation since 1st April, when the new
figures took effect.

There are a number of important changes to the appeals regulations proposed for the 2005 Revaluation. The most significant changes are as follows:

* Under the previous arrangements an appeal could only lead to a recalculation of the bills from the beginning of the rate year in which the appeal was made. For the 2005 Revaluation this is due to change and an appeal made at any time between 1 April 2005 and 31 March 2010 can result in recalculation of the charges from 1 April 2005.

* Appeals will be limited to one per interested party. Further appeals will only be permitted where the Valuation Officer or Assessor has altered the rateable value between April 2005 and March 2010 (perhaps because of alterations to the property) or where circumstances have changed such that the value of the property would be affected. Each
change will give a right to one further appeal for any interested party.

* The rent passing for the premises at the date the appeal is made must be given on the appeal form.

These changes will substantially affect the tactics of the appeal process and more careful consideration will need to be given to whether and when to appeal than has previously been the case.

Appeals Against the 1 April 2005 Valuation
Any valuation is of course a matter of opinion based on evidence and can be tested only in an imperfect market. However, valuations for rating are the basis for business taxation and must also be equitable between taxpayers. The debate over fairness verses accuracy in rating valuation
has been subject of much litigation and comment and I could fill severalpages discussing it. But without fairness between occupiers of different premises, the whole integrity of the rating system could be called into question.

A ratepayer who wishes to appeal against the 1 April 2005 valuation will have to show that the rateable value is excessive. This can be done by producing evidence of rents fixed for comparable premises around the April
2003 valuation date. As agreements are reached the importance of direct rental evidence reduces and the agreed valuations add to the body of evidence against which any appeal is tested.

It is irrelevant whether the rate bill has increased or decreased as a result of the revaluation, even if the bill is reduced further savings may still be possible as a result of a successful appeal.

Appeals for changed circumstances
A reduction in rateable value might be negotiated when there is a change of circumstance; there are many varied situations where this can occur. However, there is a strict framework within which such changes may be considered.

Purely economic changes will not lead to a reduced valuation but other changes that directly affect the demand for premises may be taken into account. Appeals have been successfully made in respect of the Foot and Mouth epidemic and the attack on the World Trade Centre, when it has been possible to show that trade has been adversely affected because of reduced foreign tourism.

More obvious instances that might affect the value of premises are:

* A new by-pass that directs traffic away from an established petrol station

* Building works on adjacent premises

* A new one way system affecting access to part of a town centre

* A new out of town retail centre close to an established town

* Changes in trading patterns following pedestrianisation of a town centre

It is therefore important to keep the rateable value under constant review, and to take any opportunity to make an appeal if circumstances occur that adversely affect rental value.

The Valuation Officer will also revise valuations from time to time where circumstances change. Ratepayers
should be aware that improvements in the locality might be grounds for increasing the valuation. Under the new regulations the Valuation Officer will be able to backdate increases into earlier rate years, so provisions may need to be made in the accounts for possible future increases where changes have made the premises more valuable.

Unoccupied Premises
Rates are generally payable for unoccupied premises at 50% of the level applied to occupied properties, subject to a number of exemptions and exclusions, the principal of which are:

* No unoccupied rates are payable in the first three months following vacation (or in the case of new premises completion)

* Listed buildings are exempt from unoccupied rates

* Industrial premises and premises used for storage are also exempt from unoccupied rates

Where premises are vacant during the course of refurbishment or held vacant pending demolition it may be possible to have the rateable value reduced to a nominal level, thus avoiding the unoccupied rate charge (of 50%).

Premises in disrepair are subject to special rules for rating valuations, and it is assumed that a landlord of the premises would put them into repair rather than accept a reduced rent. Therefore, in seeking nominal valuations for premises awaiting refurbishment it will be necessary to
show that the works required to make the premises useable are not repairs, or that they would be so expensive that a reasonable landlord would not do them.

Part Occupied Property
Where premises are partly occupied it may be possible to have the rateable value split between the occupied and unoccupied parts so as to obtain relief on the vacant areas. In order to obtain a split of the assessment it is necessary for the premises to be capable of separate occupation.

Where a division is not possible and the vacation is only temporary, the Council has a discretionary power to grant relief on the unoccupied part.This is based on an apportionment of the rateable value between the
occupied and unoccupied areas. An application must be made to the Council, which, if it is willing to grant relief, will ask the Valuation Officer to apportion the valuation.

Rate Bill and Transitional Errors
Although appeals cannot be made against the uniform business rate, bills may be subject to challenge for calculation errors. This is a complex area of rating law and it is not possible to give a definitive list of
circumstances where it may be possible to challenge bills.

The complexities of the transitional regulations are such that even the sophisticated computer programmes used by Local Authorities do not always produce the correct answers. This can especially occur when there are
many changes to the rateable value, particularly if more than one assessment is involved, e.g. when existing premises are split, or are merged with adjacent premises.

Rates Audit
For large organisations it is well worth commissioning an audit of past liability to identify any possible overpayments. This is a highly specialised field of expertise and involves a detailed examination of back
dated bills to ensure that the rates have been properly calculated.

Following established practice over the past three Business Rates Revaluations, the Government has introduced a scheme of "Transitional Relief". This is aimed at softening the impact for those whose bills stand to increase the most. The scheme fixes the maximum amount by which the bill can be increased or reduced between one year and the next.

With the limitation on appeals it will be all the more important for occupiers to ensure they are getting the right advice. There will be no second chance to correct mistakes. The past few years have seen much comment about unqualified and unregulated rating advisors. Many property
managers have become sceptical about the value of the advice available.

Those requiring advice, or those who are unsure of how the changes are likely to affect them, should feel confident in speaking to qualified surveyors who can provide guidance through the approaching revaluation minefield. If in doubt ratepayers should ask advisors if they are members of the Royal Institution of Chartered Surveyors(RICS) or Institute of Revenues Rating and Valuations (IRRV). Both organisations have rigorous professional standards and rules of conduct specifically referring to
business rates advice.