Business rates are charged on the majority of commercial properties, such as shops and offices, and represent one of the largest overheads for businesses. They are calculated using the rateable value of the property (the amount of rent reasonably obtainable for the property) and the relevant multiplier, as set by the Department for Communities and Local Government.
This regime is braced for a set of developments this year, not all being beneficial to owners and occupiers of commercial property. These include the following:
(i) Enterprise Zones
Enterprise Zones were introduced by the Government to create hubs of economic growth through a number of financial incentives, which include reduced business rates. It is proposed that in April this year the Government will be announcing 18 new Enterprise Zones and extending 8 of the existing zones, to all benefit from reduced business rates.
(ii) Empty Property Rate Relief
Business rates are often referred to as the “bomb-site tax” as they are also payable on unoccupied properties, subject to a number of exceptions. One of these exceptions, which came into force in 2013 and provides Local Authorities with discretionary powers to grant up to an additional 15 months rate relief for newly built commercial buildings, is set to come to an end as of 1 October 2016.
(iii) Substantial Refurbishment
Where works are undertaken to improve or extend a vacant property, the valuation regarding the rateable value of the property may be deemed nominal while the works are carried out.
Last year the Court of Appeal held that a property undergoing internal non-structural refurbishment was not exempt from business rates (Newbigin (Valuation Officer) v S J & J Monk [2015] EWCA Civ 78). It was ruled that, on the facts of the case, the replacement of all the stripped out elements should be categorised as repairs and not renewal. The decision increased doubt for property owners undertaking works to vacant properties and who want to benefit from this relief.
The Supreme Court has granted permission to appeal this decision, which will possibly be heard later this year.
