The retail property sector was one of the worst hit by the recession. In many areas it’s still in recovery mode. Little wonder then that retailers are eagerly awaiting the 2017 Rating Revaluation which should lead to the Rateable Values on shops in many High Streets being dramatically reduced.
Whereas the current figures are still based upon pre-recession rental levels the new 2017 Rateable Values will be based upon rental levels prevailing in April 2015. In some locations rental values are a fraction of what they were at the top of the market in early 2008.
There is a potential shock in store though for retailers expecting large reductions in their actual 2017 rates bills. At a revaluation the Government phases in any reductions in rates bills. If the government implements the same downward caps on rate reductions as it did at the last Rating Revaluation, then the maximum amount a bill will fall in 2017 could be restricted to just 2%. So, even if a shop’s Rateable Value falls by 50%, the actual rates bill may initially only reduce by 2%.
What’s more, caps on rate reductions are in place for up to 5 years. Retailers in locations hit hardest by the recession may have to wait many years to see much of a difference in their rates bills despite the Rateable Values no longer being pinned to pre-recession 2008 values.
Change needed to the system
The caps on rates reductions finance the cost of capping increases on properties facing increased rates bills.
The current system which has been in place since 1990 has in my view though always been unjust. How can it be right that the entire cost of capping rate increases in strongly performing property sectors falls solely on the shoulders of those in underperforming property sectors/locations whose rates bills should be reducing?
The system needs to change. I believe instead that a small addition should be made to the national Uniform Business Rate spread over the 5 years to pay for the cost of capping rate increases. The capping of rate reductions could then be abolished.
With the 2015 Revaluation having been put back to 2017 this would address the pressing need to ensure that those benefitting from the long awaited Rating Revaluation receive that benefit as soon as possible.
Notes to editor
Robert Sherwill is partner at Allsop and heads up the Business Rates team.
He specialises in the retail sector and has a vast range of experience. Robert is Chairman of the influential Rating Surveyors Association Retail Panel and is a past member of the RICS Rating and Local Taxation Policy Panel. He is responsible for chairing the rate appeal negotiations in many high profile retail locations including London’s Oxford Street and Westfield London. In 1999 he established and has since run the nationwide scheme used by rating agents to identify rate saving situations on shops.
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