For commercial property owners, businesses and developers, business rates are a major factor and overhead to consider. Increasingly, our business rates team are coming across many industry myths that their clients have come to understand as fact.
In response, we have covered a few of our most frequently asked questions to dispel the myths and shed some much-needed clarity
I have secured planning with the intention to redevelop the building. On this basis, my property should be removed from the rating list.
Not necessarily. A valid planning consent and the intention to redevelop is not enough in isolation to remove the business rates liability. We would not encourage lodging a Check (nb. Check, Challenge, Appeal – CCA – is the new route of appeal) prior to the start of works on-site, rather we recommend lodging a CCA once the building has been stripped out and is not fit for its intended use.
This is because the date at which the Check has been made, automatically becomes the ‘material date’ for the CCA, which means that the case is considered on the basis of the physical condition of the building on that specific day. If the works to the building are radical at the date of the Check, it reduces the likelihood of the CCA being rejected by the Valuation Office
Agency (VOA) on the basis that the building is merely being repaired.
My building is vacant and derelict, this means that it will automatically be taken out of the business rates list
Unfortunately this is not the case. Owning a derelict building is not reason enough to secure a Rateable Value (RV) of £0.
Despite the physical state of the building, it is commonly argued by the VOA that the building could be repaired to make it capable of being occupied for its original use. A derelict building is therefore likely to be liable for ongoing empty rates until it is demolished, redeveloped or repaired.
For example, a building that has sockets hanging off the walls, a leaky roof and crumbling plaster will, alarmingly, not be eligible for RV £0 unless it tips the economic repair test. That said, the level of disrepair is an important consideration for the VOA to take into account when reviewing a potential case and so advice should always be sought to negate possible rejection.
It is also useful to note that if there is un-encapsulated asbestos in the building, or other issues that would relate to the building needing substantial work to make it safe to reoccupy, there may still be some scope for action.
Is my property eligible to be taken out of the list if I knock out the toilets and take out the services (M&E, water etc.)?
In short, no. The case that we rely on to achieve an RV of £0 is the recent Supreme Court case – Monk vs Newbigin. This case set the precedent for the physical factors and circumstances that should warrant an RV of £0 – albeit the VOA will usually argue!
In this case there were a number of criteria that were key in affecting the physical condition of the property in such a way that the Supreme Court ruled that an RV of £0 was entirely appropriate;
- The works undertaken formed part of a wider scheme of works – albeit paused,
- The building had been stripped to shell and core (removal of raised floor, M&E, suspended ceilings etc.).
- The floorplate was being altered to create a demise that was different to that which existed before.
Therefore, if parallels can be drawn between a building undergoing redevelopment and the case that is referred to above, a Check to receive an RV £0 should be lodged.
It is important to stress however that thorough evidence is absolutely critical in getting these cases over the line. Every day we hear of Checks failing through a lack of evidence.
I have demolished my building and it is out of the business rates list – there is no more that I need to do
Congratulations on achieving your desired result – however, there may still be more that can be done. If the date at which the building was deleted (or given an RV of £0) is later than the date that the strip out works initially started, then there is reason to make the case for an earlier effective date.
We have assisted with a number of such appeals whereby an earlier effective date has been achieved – these have led to some significant backdated savings.
If all of my redevelopments were completed prior to the 01 April 2017 cut-off date; is there anything I can do to address these historic developments?
Yes and no – although it is important to emphasise that there must be clear and transparent evidence to support your claim. In terms of traditional valuation appeals (or Monk based redevelopment cases), there is a strict deadline that means we cannot challenge prior to this date.
However, cases that refer to issues that are dealt with directly by the local authority may apply some leeway to this deadline.
For example, if you have been paying empty rates on a listed building, have not utilised the statutory empty rates exemption or have had issues around asbestos or fire certificates, we can try to reclaim monies that relate to each of these, provided that there is enough evidence to support any claim.
If I have property guardians in my building, does that mean that all of my empty rates concerns are in hand?
Although guardian schemes are now a widely used and accepted means of mitigating empty business rates – indeed many local authorities utilise these schemes themselves, certain providers should be treated with caution. Property guardians are people that occupy the building as a form of live-in security. Various ‘guardian providers’ exist to organise this service, often alongside making an appeal to move the building from the business rates to the council tax list as a result of guardian occupancy. However, we have found that this does not always occur and the saving that is promised, is not always delivered.
This can result in some landlords paying both an ongoing business rates liability and a management fee to the guardian company, despite an appeal having never been made by the guardian company to reduce the property’s rateable value.
I have had completion notices served on a building where the redevelopment is only just completing, is there anything I can do?
Completions notices are issued by the local billing authority to re-introduce a newly built or redeveloped building into the council tax or business rate list. They are issued to alert the developer or landlord to the fact that the building has a three-month window until rates will become payable.
Few people are aware that these notices can be disputed, as long as an appeal is made within 28 days of the date of the notice. There are limited grounds upon which the notice can be appealed, but it is certainly worthwhile investigating if the asset remains vacant and does not have pre-lets. It is also possible to try to engage with the local authority prior to completion to delay the issuance of Completion Notices in the first instance.
The new ‘Check Challenge Appeal’ system is too complicated to use. To avoid the headache, should I just rely on the local council to help?
No, the CCA system is certainly worth engaging with – we have achieved a high level of success using this new method of appeal.
Furthermore, local billing authorities are incentivised to collect and retain as much rating cash as possible. Despite the fact that they may (if asked) eventually raise a report to the VOA to have a building removed from the rating list on account of a demolition or change of mode or category. It is not in their interest to secure a favourable date for such a removal which means that your interests are not being protected.
In line with cases whereby the precedent has been set in law, property developers and landlords may be entitled to the removal of their rating liability from an earlier and more appropriate date – the date that the site was put into contractor’s hands. There is a very clear conflict of interest and it will hit your pocket not to be proactive!
