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Changes to Business Rates

Jason Tann, Head of Commercial Real Estate at Pemberton Greenish LLP, comments

Last September the Government published draft revised rateable values (‘RV’s’) for all commercial properties in England. It is estimated that over 1.8m properties have been revalued and once finalised these RVs will be used to calculate the business rates payable by commercial occupiers from 1 April 2017.  

The new figures are based on the rental value of commercial properties as at 1 April 2015 and they provide the first opportunity to understand how the Valuation Office (the ‘VO’) has responded to the revaluation challenge. Given that the current valuation was set in 2008, a considerable hike in rates bills is expected in those areas that have seen significant rental growth since then.  

Conversely, there will be rates reductions in areas where rental values had not recovered from the recession. Not surprisingly, the increases are expected to focus on London and the decreases in the regions.  The net effect will be to compound the polarising of the cost of occupying commercial premises between London and the rest of the country.  

The Government was consulting on transitional arrangements to mitigate any overnight effects of substantial increases or decreases in RVs. At the cost of delaying the receipt of the full benefit to those properties where RVs have fallen, increases will be phased in over a period of time. Transitional arrangements will be put in place and the consultation was simply in relation to how long it will take before the new rates become payable in full. The Government’s preferred option phases the changes in more quickly to enable the benefit of rates reductions in the regions to apply sooner. If implemented, this will almost certainly be at the expense of the London rate-payer.

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