Licensees worry over hike in rates

Business rates on commercial properties could see rises of up to 75 per cent, a new report has warned. The impact of the 2005 Rating Revaluation...

Business rates on commercial properties could see rises of up to 75 per cent, a new report has warned. The impact of the 2005 Rating Revaluation report by surveyor Gerald Eve says that the government's re-evaluation of property rates will see the retail sector and in particular the high street hit. This is due to high rental increases and the property boom over the past years, it says.

The rateable value of a property is based on the value of the business, which includes a combination of rental values and turnover. Rents are to be collated by the valuation officer in April 2003 before the setting of new rateable values for the five-year period from 2005 to 2010.

It is feared that many licensees, who are already facing hardship and possible bankruptcy because of high rent and beer prices, could find an additional financial burden placed on them with a large hike in rates in 2005. Although licensees can claim a rebate on miscalculated rates they are only able to claim from the start of the financial year in which an appeal is lodged.

Gerry Schurder, a director at Gerald Eve, has warned: "At every revaluation there are winners and losers. But in the last five years, rents have gone up substantially across the board and these will be reflected in the rate increases payable in 2005."

Advice from Edward Symmons Hotel & Leisure on business rates

The valuation office, a section of the Inland Revenue, will send forms of return to occupiers of all commercial properties in England and Wales. Completion of these forms is mandatory and the information supplied will go on to form the basis of the rating assessments that will appear in the next rating list.

The new rating list will not come into force until April 1 2005.

What is a rating assessment?

Rating assessments are based on rental values at a pre-determined date - April 1 2003 in the case of this revaluation.

But what if your commercial premises, like many hotels and leisure properties, are held freehold?

In the absence of sufficient rental evidence the valuation office generally relies on trading accounts to assess such property types.

For understandable reasons the valuation office greatly values the information provided on the forms of return so it is essential that these forms are completed accurately. For leisure operators and pubs, the information requested will focus on two key areas:

the provision of trading accounts covering the past three years - every business is unique with the earnings of some being heavily influenced by the goodwill of the proprietor. Personal goodwill will be disregarded in the assessment
information on legal title. In particular, the valuation office will need to establish rental levels and lease terms in respect of leasehold properties.

While you will have the right to appeal the proposed rating assessment, accurate and clearly presented information will assist the valuation office in their initial calculations, thus reducing the risk of serious over assessment.

If you do have doubts, do not hesitate to ask your rating adviser to check the information you are providing on the form before you send it back to the valuation office.

So how can you challenge your rating assessment?

There are a variety of grounds on which you may challenge your current rating assessment:

You can lodge an appeal if you consider it to be excessive by comparison with other similar type properties in your neighbourhood.
If your business has been adversely affected due to a material change in your locality you may also lodge an appeal seeking either a permanent or a temporary reduction in assessment. A few examples involving a material change are:

exceptional events such as the terrorist attack on September 11 2001. This resulted in a 25 per cent reduction of rating assessments of three five-star central London hotels
the outbreak of foot-and-mouth disease affected many businesses in rural areas such as Devon, Cornwall and Cumbria. Businesses affected included
golf courses, visitor attractions, theme parks and other leisure properties
if refurbishment of your pub causes part of the premises to become incapable of occupation for a reasonable period of time
if building works to adjoining premises cause disruption to your own business
if the construction of a by-pass alters the traffic flow within your neighbourhood.