If you are a property owner or developer you may welcome a recent decision by the Supreme Court about the business rate revaluation. With the revaluation looming on 1st April 2017, you may find yourself facing rates hikes.
Below is advice for the owners of properties undergoing refurbishment or renovation work.
Common sense approach
The Court has ruled that a common sense approach should be taken when considering properties undergoing major refurbishment or renovation works. This means that the rateable value will now reflect the actual state of the premises in reality, as opposed to the amount of annual rent which could have been achievable had the property been in a state of reasonable repair at the time of the assessment.
- Re-categorising properties
The benefits of this approach could be widely felt by those with buildings undergoing reconstruction, refurbishment or alterations as such development (which renders the premises incapable of occupation) may now merit an amendment to the ratings list.
This will re-categorise the property as a ‘building undergoing reconstruction,’ which can in some cases mean a rateable value of just £1. However, the decision will not apply to buildings which are simply in a state of disrepair, which will remain subject to a rateable value based on their estimated rent should the property be let in a state of reasonable repair.
Furthermore, it now may also be possible to reduce the rateable value of a property where some of the building is undergoing development. Any part of the building capable of occupation will be liable for business rates in the current manner; however, any parts of the property which are undergoing renovation can be reassessed as separate areas.
A warning for abuse of the provision
The Court also issued a warning to anyone considering abuse of the new provision in order to avoid liability, perhaps by the removal of windows or sanitary equipment in order to claim that the property is incapable of occupation, or by the partial implementation of works which are deliberately not completed. Such abuse will prompt anti-avoidance measures being taken in the future.
Some feel that the judgment may be an invitation for disputes, perhaps over the extent of a property which is capable of occupation, or whether the non-completion of a scheme of works was a deliberate strategy to avoid rates liability.
However, for property owners who would currently be subject to business rates whilst funding redevelopments, the decision will come as a welcome relief in the lead-up to the revaluation.
If you would like a free, no obligation discussion about your business rates revaluation (and tips to check the assessment is correct), please get in touch.
Property query: contact Sian
Litigation query: contact John