Saturday, 13 September 2008

Business Rate revaluations

In April I wrote a blog about the start of the process of revaluation for the 2010 ratings list by the Valuations Office Agency (VOA); at that time I warned of the recessionary signs that were developing and hoped that the revaluations would reflect the reality of the economy. Welbeck as ever is ahead of the game.

I note that this week the Retail Week has reported 'in brief' that the British Retail Consortium (BRC) has warned retailers of a 16 per cent average increase but also that research from two property experts GL Hearn and Investment Property Databank shows a much smaller increase for offices at 3.1 per cent.

I think it was the landlords representatives in the recent continuing discourse on rent reviews who argued that "if we can only negotiate new rates every 5 to ten years then we must be able to introduce a level at the start that will give a fair return at the end of that period". On that basis, and some of the BRC members are also landlords, so it is pertinent to introduce this line of argument, 16% seems quite realistic - recent fuel charges for heating and lighting has risen by over 30% in one hike, with more to come? But I am not condoning the rise given that it is introduced arbitarily .This arcane system of taxation is based upon notional rental values in a concise area. Given that landlords are notoriously slow in reducing rentals even when areas suffer loss of markets because of new developments or other factors, there can easily be a delay in reflecting the loss of trade in the rateable value. This is especially true at times such as this where these developments come late in the 5 yearly cycle and revaluations are already set for the next ratings list - a valuation established in 2008 will apply to a property from 2010 to 2015.

It is, of course true, that retailers can appeal the rateable value by making a proposition to change it, and I am sure the VOA would tell us so. However, I carried out some research in Southampton last year and discovered some really strange anomalies and also some evidence to suggest that the VOA is not fair in the way that it carries out valuations and that smaller businesses fair far worse than larger ones. This seems to be primarily because of a lack of understanding and expertise on their part of this arcane system rather than any ill will on the part of the VOA, but I will note that 2005 revaluations saw increases of above 100% for some small retail businesses in that City - they'll think themselves well pleased if the increase were constrained to 16%. I will not labour the point since it has been made in a paper that is to be published in the new year and I do not wish to get ahead of myself, but it would be good to subscribe to the 'Journal of Place Management' and to read the paper there.

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