The rateable values (RV) of all licensed properties are reviewed every five years. The current rating lists came into effect on 1 April 2010. To enable the VOA to undertake the valuations, the antecedent valuation date (AVD) is set by legislation, two years before the start of the relevant rating list. So the AVD for the 2010 rating list is 1 April 2008 and this sets the economic circumstances for the valuations.
The RV is equivalent to the annual rent that a tenant would pay to occupy a property, assuming they were responsible for (and undertook) all necessary repairs to maintain the premises in a reasonable condition.
How business rates are assessed
When assessing RVs, the VOA adopts the same method of valuation that the open market uses for each type of property. Pubs are valued in the open market by reference to accounts and the fair maintainable trade (FMT) of a particular business.
The open-market pub rents analysed by the VOA already reflect the market’s view on the profit profile so the VOA can focus directly on the percentage relationship of rent to turnover.
The FMT for a public house is taken to be the level of annual turnover that a reasonably efficient operator would achieve, operating the business from that property on the AVD. A percentage is applied to each of the income streams — typically wet, dry, machines, accommodation — reflecting the rental worth of each, as well as the location, style of offer and costs of occupation.
The VOA has been using the FMT principle since 1995, in line with industry practice. It regularly consults with trade bodies such as the British Beer & Pub Association to make sure that its approach reflects changes in the industry.
How to appeal rateable value
If a ratepayer thinks their RV doesn’t reflect the position at AVD then they can appeal and the RV may be altered with effect from 1 April 2010. It helps any appeal to have the trading figures from the time. A ratepayer can contact the VOA directly, or retain the services of an experienced chartered surveyor.
However the appeal is handled, the RV of a property as at 1 April 2010 can be appealed only once. Many licensees believe that their rating assessment should be reduced, due to the fact that trade “is not as good as it was”. While this may be true, legislation requires the RV to represent the rental value of the property at 1 April 2008, so it is the FMT then that is relevant.
Where there have been changes to the physical circumstances of the property, location or competition since April 2008, the RV can be challenged when required. It is necessary to demonstrate the effect the change has had on the FMT for an appeal to be successful.
It is also possible to appeal the RV due to the closure or down-sizing of another business in the locality. When assessing the potential effect on the RV, the impact on FMT is considered as if the same event had occurred on 1 April 2008.
Beware: appeals do not always mean a reduction
Do remember too that RVs can increase on appeal, if information provided to the VOA indicates that the RV was under-assessed. This could be due to outdated information regarding trading levels, or physical alterations to a property, which lead to improved trade — of which the VOA was not aware.
Throughout the process, it is important ratepayers receive expert advice. Not only to ensure the RV is agreed at the correct level, but
also to be aware of the impact the effective date of any revised RV can have on their rates bill. It is possible to achieve sizeable cuts in RV, but not significant savings in rate liability.
The Valuation Office Agency has produced frequently asked questions about valuation of pubs
■ Got a question about business rates you’d like addressed by our experts? If so, email Gurjit Degun.