Rating – the road to revaluation: Reliefs

by Dentons


Whilst the government argues that the 2017 revaluation ensures that all businesses are getting a fair deal, with the majority of businesses across the country being "unaffected or better off with the changes", it has been well publicised that many businesses are facing sharp rises in rateable value (RV) when the rating list goes live on 1 April 2017.

With such sharp rises expected, this instalment of Dentons' business rates series explores the main reliefs open to ratepayers.

Empty properties

As a general rule, you don’t pay business rates on properties that are empty for three months. Industrial properties, however, benefit from an additional three-month period and the following benefit from relief until they are occupied again:

  • listed buildings;
  • properties with an RV under £2,900;
  • properties owned by charities and used for charitable purposes; and
  • community amateur sports clubs, provided that the next use of the property will be that of a sports club.

To obtain the relief, the property must have previously been occupied for at least 42 days and rates must have been paid for that period.

Transitional relief

Transitional relief limits how much your rates bill can change each year as a result of revaluation. The relief phases the changes to your bill gradually, to soften the impact of revaluation. The limits apply where your rates increase or decrease by more than a certain amount linked to geographical location and sector.

Transitional relief is self-funded. The cost of any upward transition (i.e. for ratepayers whose bills increase) is funded by ratepayers whose bills decrease as a result of revaluation. The table below outlines the transitional caps from 1 April 20171

    2017/18 2018/19 2019/20 2020/21 2021/22
Upwards Cap (excluding inflation) Small 5.0 7.5 10.0 15.0 15.0
Medium 12.5 17.5 20.0 25.0 25.0
Large 42.0 32.0 49.0 16.0 6.0
Downwards Cap (excluding inflation) Small 20.0 30.0 35.0 55.0 55.0
Medium 10.0 15.0 20.0 25.0 25.0
Large 4.1 4.6 5.9 5.8 4.8

So, whilst the government may have introduced a more generous upward relief scheme, small businesses with a reduced 2017 RV are being significantly penalised, having to subsidise these increases as a result of downward transition.

Tim Harrison, Partner at Cushman & Wakefield, comments: "What seems to have been missed by some commentators is the unfair system of downward transition that has also been put in place again. Many ratepayers were hoping to benefit from the revaluation as a result of their RVs going down but will instead be required to meet the cost of upward transition for those ratepayers whose RVs have gone up. For example, for a large business with an RV over £100,000 that is expecting a fall in liability, this will be restricted to a fall of only 4.1 per cent plus inflation in the first year. Smaller businesses with RVs below this £100,000 RV limit but above £20,000 outside London will see a greater fall in liability but again will be restricted to a maximum of 10 per cent plus inflation in the first year. The expected fall in liability from the revaluation will in fact be phased in over the life of the list to fund the increases. This is what makes the system really unfair as making these ratepayers fund transitional relief adds insult to historic injury especially as the revaluation was delayed for two years."

Relief for properties incapable of beneficial occupation

The recent Supreme Court case of Newbigin2 has strengthened the position that if a property is incapable of beneficial occupation (in this case where a property had been stripped back to a shell during redevelopment works) it will qualify for 100 per cent relief. This is a huge win for property developers across the country, with the Supreme Court overruling the previous decision, providing much-needed clarity and common sense for developers. In summary, the guiding principle is that, if a property is in reality not capable of beneficial occupation, then it will qualify for the relief. There is no need for there to be an inquiry into whether the property should be in a hypothetical state of repair.

Other reliefs

Small business rate relief

Small business rate relief applies if your RV is less than £15,000 and your business only uses one property. From 1 April 2017, rates are not payable on a property with an RV of £12,000 or less. For properties with an RV of £12,001 to £15,000, the rate of relief is phased from 100 per cent to 0 per cent.

If your business uses more than one property, you continue to get the existing small business relief on your main property for 12 months, but not on any additional properties unless you meet certain criteria.  

If your property has an RV below £51,000 your rates bill will be calculated using the small business multiplier of 46.6 pence compared to the standard 47.9 pence. So, whilst you may not qualify for relief, you will benefit from the smaller multiplier. 

The Chancellor's Spring 2017 Budget provided that businesses losing small business rate relief from 1 April 2017 would not have an increased rates bill of more than £50 a month. The aim of this is to mitigate some of the criticism aimed at government arising from the harsh consequences of revaluation on some small businesses.

Rural relief

From 1 April 2017, you will receive 100 per cent relief if your business is in a rural area with a population below 3,000 and is:

  • the only village shop or post office with an RV of up to £8,500; or
  • the only public house or petrol station with an RV of up to £12,500.

Relief for part-occupied properties

Relief can also be obtained on properties that are partly occupied due to the ratepayer:

  • gradually moving in or out of the whole property over a period of time; or
  • temporarily occupying the property e.g. due to his/her usual property being rebuilt or refurbished.

Relief can only be obtained where the partial occupation is for a temporary period, e.g. no more than six months in any 12-month period.

Charitable rate relief

Relief is available to registered charities and community amateur sports clubs. Relief of up to 80 per cent can be applied for provided the property is used for charitable purposes.

Such relief may, in certain circumstances, be increased to 100 per cent at the discretion of the local billing authority. Discretionary relief may also be available to not-for-profit or voluntary organisations.

Enterprise Zones

If you are starting up or relocating to an Enterprise Zone, you can apply for relief of up to £55,000 over a period of five years. Each billing authority has a discretion as to how that relief may be applied.

Hardship relief

Billing authorities can also reduce your rates bill if you are in financial difficulty and such relief is in the interests of the local community. To aide this relief, the Chancellor announced in the Spring 2017 Budget that a £300 million fund was being put aside for billing authorities.

Spring Budget 2017

As well as the announcement concerning those losing small business rates relief in the 2017 revaluation, the Chancellor also announced that there would be a £300 million hardship fund available to local government in order to assist appropriate businesses struggling as a result of the revaluation.  Finally, the Chancellor also announced a £1,000 business rates discount for public houses with an RV of up to £100,000 subject to state aid limits for businesses with multiple properties, for one year from 1 April 2017.

1 Department for Communities and Local Government, November 2016: Consultation on the transitional arrangements for the 2017 business rates revaluation.

2 Newbigin (Valuation Officer) v. S J & J Monk [2017] UKSC 14

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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