The oldest of the UK’s taxes, with the possible exception of stamp duty, the origins of rating can be traced to before 1597. It is usually fairer and more successful to tax people who have money and, because originally that meant owning land and buildings, to raise a sum of money by apportioning the required amount ‘rateably’ among occupiers in proportion to the annual rental value of their occupation of land and buildings.
Strictly, properties are not rateable, but people that occupy properties are rateable for their occupation. A rateable property is known as a ‘hereditament’ (Latin hereditare, to inherit; from heres, heir.) Rates are a tax on occupation, which is why rates on empty property are considered separate from the main rating system, the period for exemption varying according to Government policy. Business rates is a misnomer, there is no requirement for a business to be run in the property for it to be assessed for rates. The difference between business rates and Council Tax is to do with identifying the parts of the property to be treated as non-domestic and domestic.
Popular parlance can confuse Rateable Value and rates payable. Rateable Value is the value of the property based on statutory definition and rating case-law, whereas the rates payable (the amount of tax) are calculated by multiplying the Rateable Value by the rate in the £ (poundage). Before 1990, Local Authorities were allowed to set their own annual rate, but since then poundage, known as the Uniform Business Rate (“UBR”), is set nationally by the Government, with billing authorities responsible for collection and forwarding to the Government for distribution to Local Authorities. Some local authorities can levy a supplement on the UBR for funding major projects.
Since 1990, when the rating system was overhauled, Rateable Values for non-domestic hereditaments are revalued every 5 years. Revaluation does not mean the rates payable would change: that would depend upon the poundage. The valuation is undertaken by the Valuation Office Agency (”VOA”), an executive agency sponsored by HMRC, which provides the Government with valuations and property advice for tax and benefits. The VOA sets a Rateable Value on each property and compiles a List containing details for each entry. The valuation date, known as the antecedent valuation date (“avd”) is two years before the commencement of each Revaluation. For the current revaluation effective 1 April 2010, the avd is 1 April 2008 which, being around the time of peak rents in most places, is why there was consternation in 2012 over the Government’s decision to delay the 2015 Revaluation until 2017. It has been announced that the 2017 Revaluation avd will be 1 April 2015.
Rateable Value is based on the valuation tone, each part of the property referenced (measured) using the metric system and valued using £per square metre (£psm). Tones vary according to the VOA’s scheme, or classification of the property. Whether there is any scope for reducing the Rateable Value depends upon the accuracy of the VOA’s information: for example, areas, relativities for use or parts of the hereditament, tone, and evidence. There is a statutory duty to provide the VOA with occupancy details and during discussions with appellants the VOA will normally disclose evidence, but external rating surveyors or unrepresented appellants could, if they do not have the contacts or facts to hand, then be at a disadvantage when gathering evidence before lodging an appeal.
Generally, the VOA prefers to deal with other surveyors to agree a tone which is why it may be harder for an unrepresented appellant to succeed. A tone is established, either by agreement, VT, or by default (no successful appeals). A Rateable Value does not have to remain unchanged throughout a Revaluation period: the entry in the List could be altered up or down and at any time depending upon material changes of circumstances including but not limited to structural alteration, rateable plant and machinery, occupancy and usage during the period. Since a way to minimise rates payable is to reduce the Rateable Value, the common change arises out of a successful appeal against the entry in the List. Appeal procedure involves a prescribed form to the VOA. Generally, appeals are agreed following ‘without prejudice’ discussion between the VOA and the appellant. There is a dispute resolution procedure to the Valuation Tribunal, on point of law to the Lands Tribunal or higher court.
Rateable Value is a technical valuation based upon rating law and rating surveyors are specialists both in rating valuation and rates payable. Generally, fees charged by rating surveyor are client-specific, but rating advice is big business, the services market competitive. For the 1990, 1995, and 2000 Revaluations, as a result of thousands of appeals made by what were described by rating establishment professionals as ‘cowboys’, the accuracy of the VOA’s information was updated, thereby limiting potential for future substantial reductions. Because most ratepayers are more interested in rates payable than Rateable Value, it is not unknown for some advisers to exaggerate the savings that might be obtainable by using their services, also for terms of engagement to commit a ratepayer to a renumeration that could be disproportionate to benefit. For example, with no-win-no-fee, where the fee is a sizable percentage of rates saving annually throughout the Revaluation period, any extension to the period (such as the Government’s decision in 2012 to extend the current period to 2017) could result in the ratepayer required to pay a further two years of fees. An appeal draws the Rateable Value to the VOA’s attention which means that, upon considering the facts, ill-advised appeals could result in an increase in Rateable Value.
The rating system has become burdensome; there are different systems for England, Wales, and Scotland. Too many appeals also take too long to resolve. In 2013 the Government opened up a consultation on the reform of business rates in England. The socioeconomic consequences of rating tax reform should not be a consequence of state profligacy.
The Rent Review Specialist