Business Rates in East Cambridgeshire Monday 31 January 2011

NON-DOMESTIC VALUATIONSNON-DOMESTIC VALUATIONSFOR RATINGFOR RATINGMake business rates Make business rates youryour business businessMark Catley MRICS FAAV Valuation Officer, St Albans Group

Duncan McLaren MRICS Dip RatingTeam Leader, Rating Cambridge

Valuation Office Agency

What the VOA doesWhat the VOA does

Central government Executive Agency

Professional property valuations: 1.8 million non-domestic ‘rateable values’ for

business rates 22 million domestic council tax bands 153 local housing allowance zones 75,437 (2008/09) fair rents for private rented

sector tenants Property valuations for HMRC tax purposes Strategic asset management and energy

performance certificates for the public sector

Business rates – the basicsBusiness rates – the basics

Tax paid on business premises and other non-domestic properties

Nationally pooled, then redistributed between local authorities in proportion to adult population

Funds contribute directly toward cost of local authority services

More information at: www.businesslink.gov.uk

Business rates – who’s whoBusiness rates – who’s who

Valuation Office Agency assesses rateable value

Communities & Local Government / Welsh Assembly Government sets policy framework, rate reliefs and national multiplier

Local Authority uses rateable value in calculation of rates liability, applies

reliefs/discounts, issues bills and collects payments

Business rates billEXAMPLE

rateable value £20,000

multiplier £0.414

bill total £8,280

This is set by the government

This is calculated and

collected by East Cambridgeshie District Council

This is set by the Valuation Office

Agency

The size of the task – The size of the task – nationally nationally Total of 1,793,967 properties to value • bulk” classes to be valued include:

• 510,000 shops (including banks, post offices, etc):• 287,000 offices;• 195,000 warehouses; 242,000 factories, stores, etc

• other classes with significant numbers:• 66,000 licensed properties;• 41,000 advertising rights; • 47,000 car parks; • 38,000 hotels; • 33,000 restaurants/cafés; • 30,000 schools and colleges; • 28,000 hospitals/clinics

• “non bulk” classes include: • everything else from A to Z (airports to zoos)

The size of the task – The size of the task –

CambridgeshireCambridgeshire • bulk” classes to be valued include:

• 5,480 shops (including banks, post offices, etc):• 5,525 offices;• 2,900 warehouses; 3,800 factories, stores, etc

• other classes with significant numbers:• 805 licensed properties;• 345 advertising rights; • 180 car parks; • 270 hotels; • 40 restaurants/cafés; • 750 schools and colleges; • 390 hospitals/clinics

• “non bulk” classes include: • everything else from A to Z (airports to zoos)

The size of the task – East The size of the task – East

CambridgeshireCambridgeshire Total of 2,250 properties to value • bulk” classes to be valued include:

• 425 shops (including banks, post offices, etc):• 340 offices;• 265 warehouses; 380 factories, stores, etc

• other classes with significant numbers:• 80 licensed properties;• 5 advertising rights; • 20 car parks; • 25 hotels; • 40 restaurants/cafés; • 65 schools and colleges; • 35 hospitals/clinics

• “non bulk” classes include: • everything else from A to Z (airports to zoos)

How do we value?How do we value?

Rateable value is our assessment of the rental value as at 1 April 2008

Gather and analyse rental evidence and property information to set rateable values

In some cases we use trading receipts to establish rateable value…

…in others we use building and land costs

Aim is always to establish rental value

Applying the rateable valueApplying the rateable value

For offices and industrial properties, rent generally distributed across different parts of the property on £/m² basis

workshop area office

Shops are slightly Shops are slightly different…different… In a shop the front part is the

most valuable – this becomes zone A

£/m² reduces across the retail area as you move further back from the front

A B C

retail area

office

storage

1990

RevaluationRevaluation

The five-yearly revaluation maintains fairness in the rating system by redistributing liabilities according to any differential movement in values that has occurred in the market over the five-year period

Has taken place regularly since 1990

1995200020052010

Not about increasing taxes!Not about increasing taxes!

An increase in rateable value does not necessarily mean an increased rates bill

The national multiplier (UBR) is the other key factor used by local authorities to calculate rate bills

Multiplier adjusted so that the total business rate stays the same, only allowing for inflation

In England the multiplier for 2010/11 is 41.4p, down from 48.5p in 2009/10

In Wales the multiplier for 2010/11 is 40.9p, down from 48.9p in 2009/10

1 April 2008 values – why?1 April 2008 values – why?

Date fixed two years in advance to ensure that information to support the valuation process is available

Common date ensures fairness and is the same for all ratepayers

Rental values in 2010 may be lower than they were in 2008 but: 2010 multiplier significantly reduced rates bill depends on relativities across

all rateable values at valuation date, not on changes in the rental market between 2008 and 2010

Business rate reliefs and Business rate reliefs and discountsdiscounts

Transitional relief for 2010 list Small Business Rate Relief

small business rate multiplier percentage discounts

Additional reliefs for charities, some non-profit and some rural businesses

Ensuring accuracyEnsuring accuracy

Use wide variety of evidence of actual rents paid

Research the rental market Valuations carried out at local levelValuation date

May be seen as a ‘high’ point in the market Multiplier has been reduced to ensure no

extra money is raised at national level Changing the date would mean the

multiplier not reduced so much Date is just the point to identify relativities

Ensuring accuracyEnsuring accuracy

Use wide variety of evidence of actual rents paid

Research the rental market Valuations carried out at local levelValuation date

May be seen as a ‘high’ point in the market Multiplier has been reduced to ensure no

extra money is raised at national level Changing the date would mean the

multiplier not reduced so much Date is just the point to identify relativities

Situation at 1 April 2008Situation at 1 April 2008 Economic slowdown – but how much? B of E base rate 5.25% Stock Market – FTSE 100 @ 5701 Northern Rock nationalised 18/2/2008 Prospects for Property

Estates Gazette 26 July 2008 “Incentives up as interest on the wane”

Empty Property Rate introduced wef 1 April 2008

Quote by Bidwells [Data Book no 15] from Dec 2007 “The slowing economy is likely to hit across all

regions as tightening credit markets make it more difficult to finance large-scale investment projects. Despite this, occupational markets have remained healthy, with rents growing in most sectors.”

Since AVD?Since AVD?

21 April - B of E and Treasury pledge emergency funding to banks

1 May - “worst of credit crisis may be over” (B of E report)

‘Melt down’ week: 14/9/08 - collapse of Lehman Brothers 17/9/08 - Lloyds comes to rescue of HBOS 19/9/08 - US officials are working on a plan costing

billions of dollars to help rid US banks of their bad debts

21 October – the ‘R’ word first used by Mervyn King 6 November – B of E cuts base rate by 1.5% 23/1/09 – UK officially enters recession as GDP falls by

1.5% Currently base rate at all time low of 0.5%Can these be reflected?

ConclusionConclusion Standing at AVD on 1 April 2008 looking

forward in the light of what has happened up to that point and making reasonable assumptions as to what might happen in the future, what rental deal might a willing landlord and willing tenant have agreed?

The landlord cannot put off the decision until another day because of uncertainty – and neither can the tenant! Cannot wait for market to settle. The deal is to be done on that day.

The events of the past year or so, therefore, have to be disregarded as they took place after the AVD and indeed were probably unforeseen as at the AVD – in terms of value.

Impact on property marketImpact on property market Greater uncertainty Companies retrenching Falling demand for property Oversupply of property Proliferation of incentives on new

lettings Less transactions End result:

Less evidence to have regard to Evidence more difficult to analyse and

to convert to the statutory terms

Checking your rateable Checking your rateable valuevalue

Raising a queryRaising a query

www.voa.gov.uk/valuation - check details, compare with others, and get in touch

Let us know of any factual errors If you have evidence to suggest the

value is wrong, share it with us as soon as possible

Professional advice is your choice Be wary of cold callers Fact sheet available

Further informationFurther information

Checking your rateable valuewww.voa.gov.uk/valuation

Information on the whole business rates system and an indication of individual rates billwww.businesslink.gov.ukwww.businesslink.gov.uk/estimatemyrates

Central government departments with responsibility for business rateswww.communities.gov.ukwww.wales.gov.uk

Getting professional adviceGetting professional advice

Make a choice, not a mistake

Guidance is available on how to chose a professional ratings advisor

Getting professional adviceGetting professional advice

If you seek professional advice ensure they are reputable Royal Institution of Chartered

Surveyors (RICS) www.rics.org Institute of Revenues Rating and

Valuation (IRRV) www.irrv.net The Rating Surveyors’ Association

www.ratingsurveyorsassociation.org Don’t pay or sign until you are

completely sure

Questions?Questions?