Chartered Surveyor and specialist golf property adviser, Mark Smith of Smith Leisure, explains to Material Matters clients why they should get ready for an October Business Rates revaluation.
You will most likely be familiar with paying business rates ‚Äď the government‚Äôs tax on occupiers of non-domestic UK properties. You will also be aware that business rates are a big fixed overhead. After salaries and wages, they might be your biggest annual overhead. Indeed, you probably pay much more in tax through business rates than you do through Corporation Tax. Business rates cost UK property occupiers around ¬£27 billion a year and are higher than the equivalent property taxes in all of the European Union countries.
Almost certainly, you will have taken steps to minimise your current business rates liability. This would have involved looking your golf venue‚Äôs current 2010 Rating List Rateable Value. If it was too high, then it could be appealed, either directly by you as the occupier or more likely, you will have appointed a specialist firm to do it for you. Decent money can be saved. From my own results in acting for my golf clients, many venues have saved around ¬£30,000 to ¬£60,000 or considerably more over the life of the current statutory 2010 Rating List. For one client the saving was ¬£500,000.
As from 1st April next year the national business rates revaluations for England, Scotland and Wales will take effect. This means that the Valuation Office Agency, an executive agency of HMRC, will be giving all relevant non-domestic UK properties a new Rateable Value. These new Rateable Values will be published in the statutory 2017 Rating List (‚ÄėValuation Roll‚Äô in Scotland). The new Rateable Values are to be published online in draft this October.
In simplified terms, and ignoring the effects of some rate relief schemes, a golf venue‚Äôs annual business rates liability is its Rateable Value times the ‚ÄėMultiplier‚Äô. The latter is set by government. This year‚Äôs Multiplier for the current 2010 Rating List (which ends on 31st March 2017) is near on 50 pence in the ¬£. Thus, a golf venue with a current Rateable Value of ¬£80,000 will be paying a tax of about ¬£40,000 in business rates this year.
A golf venue‚Äôs Rateable Value is meant to reflect its hypothetical annual rental value at a certain point in time, on the assumption that the hypothetical tenant is responsible for keeping the property in reasonable repair. This principle applies even if you own your golf venue on a freehold basis and thus no rent is payable.
For the 2010 Rating List the relevant valuation date was 1st April 2008 ‚Äď which was just before the global banking crisis and resulting deep recession (Lehman Brothers went bust in the autumn of 2008 and shortly afterwards the Royal Bank of Scotland had to be bailed out). Whilst property rental values fell significantly after 2008, the full negative impact of the recession could not be taken into account in setting Rateable Values because this was after the 1st April 2008 valuation date.
For the 2017 Rating List the relevant valuation date is 1st April 2015, which being some time before the recent EU Referendum, means (frustratingly) that any potentially adverse impact on property values as a result of the Brexit ‚Äėout vote‚Äô cannot be taken into full consideration – as this vote happened near on 15 months after the relevant valuation date.
To minimise your business rates liability from 1st April 2017 onwards you simply have to minimise your new 2017 Rateable Value. To do this you will need to consider whether your new 2017 List Rateable Value is fair and reasonable some time after its publication this October. If you think it is too high, you can challenge it and ultimately lodge a formal appeal, but fundamentally the onus will be on you to provide robust evidence that your Rateable Value is too high at the time of challenging the Valuation Office‚Äôs assessment.
There has long been criticism of the current business rates appeals system (operational for over 25 years) that it takes too long for appeals to get settled and too many appeals are lodged speculatively by occupiers and their professional representatives, with many being withdrawn with no change to the originally set Rateable Value.
In an effort to make the appeal system simpler, faster and fairer the government has totally reformed the appeal process as from 1st April 2017. The detail was contained in the Enterprise Bill, published in September 2015, followed by a consultation paper published by the Department for Communities and Local Government entitled ‚ÄėCheck, challenge, appeal ‚Äď reforming business rates appeals‚Äô.
The main thrust of the changes is to fundamentally alter the appeal process from the current one – of providing little evidence upfront to back up your case; to the new rules from 1st April 2017 – of having to state all your key evidence upfront when you challenge the assessment. Critically, the new rules are suggesting that there is limited scope to introduce further key evidence at a later date to advance your case. This means that if you are not really thorough upfront when challenging your Rateable Value, you will severely diminish your chances of a successful challenge/appeal.
Some cynics in the property profession are suggesting that the new appeal process has been designed to put occupiers (and their professional advisers) off appealing their business rates tax in an attempt to reduce the workload of the Valuation Office, a public body which is currently stretched to the limit in terms of resources.
Also, a fundamental criticism of the new system is that when the Valuation Office publishes your new Rateable Value, they will not provide the supporting evidence they used to reach their conclusions. This means they will not make available the data of rents paid at golf venues in the UK at the time of the relevant valuation date.
If you don‚Äôt have access to this information, then how can you be expected to make a good case at the outset if you are not aware of the key evidence needed to support your case? This is another reason why some are suggesting that the new rules are designed to put off ratepayers and their professional advisers in lodging challenges and appeals on their Rateable Values.
Indeed, only a handful of professional property advisers in the UK have a detailed knowledge of the rental market for golf venues. If you have used a professional firm in the past to appeal your rates, then given the new rules and you are planning to use them again, you need to have assurances from them of their true golf market credentials. Ask them to name the golf venues where they have conducted rent review negotiations and let golf venues afresh in the market. If they can‚Äôt name them, then they will be in a weak position to argue a good case for you upfront, even if they handle lot of business rates appeals in other sectors of the property market such as shops, offices and industrial buildings.
Rightly or wrongly, I chose to focus my professional career on specialising solely in the UK golf property market, and have done so for 25 years. A great deal of my work focuses around understanding the UK‚Äôs golf rental market, directly handling rent reviews and letting golf venues on behalf of clients. It is my strong belief that I can build robust cases and can quote the relevant evidence upfront in accordance with the new rules to help golf venues minimise their Rateable Values for the forthcoming 2017 business rates revaluation. I am confident that there is scope for me to help my clients save many thousands of pounds in business rates. Collectively, I have saved my golf clients many millions of ¬£‚Äôs on business rates over the years.
If you would like me to consider your golf venue‚Äôs new Rateable Value after it is published in October this year, then please contact Material Matters on 01252 621114 who will let me know to provide you ¬†a no obligation proposal.