Richard Hardbord: Revaluation strategy
0There are many uncertainties facing Section 151 Officers as they look forward over the next few years and many of them are around business rates.
However, chief finance officers do need to give some thought to the effects of the 2017 Revaluation of Business Properties.
Experience
Part of the difficulty facing local authorities is that most people with detailed business rate experience have gone. After 1990 when business rates became a central government tax (albeit collected by local authorities) most authorities gave up any detailed work on the grounds that there was no return for any investment.
Any extra money collected went to the centre and allocations back to local authorities were unaffected by the sums collected in improvements to the debit.
In a perfect utopian world, of course, a business rate revaluation would not make a lot of difference. The total of rateable values would increase and the rate poundage, or multiplier, would go down. The sums of money raised would thus stay the same. The problem is that not all classes of property will see rent increases to the same degree, and not all local authorities have the perfect mix of properties. Thus there could be considerable differences and difficulties arising as yet unforeseen.
Timing
A key date is the Autumn statement in December (the effect of global warming on autumn!). This may signal some changes to the future of business rates in particular the intervals between revaluations, back dating of appeals and the appeal process generally.
Then the draft 2017 rateable values will be published in September 2016. This is an important time for reviewing the local list and correcting errors of fact. Over the years quite substantial omissions in the list have been found. Local Authorities who have taken the step of employing an inspector have found that the increase in rateable value has funded their investment.
Then the autumn/winter of 2016 will see decisions on the poundage and the need for any transitional arrangements. Transitional arrangements are not welcomed generally by local government as they add a level of complexity to the billing and collection. On the other hand they will be necessary if the change in values over the seven years since the last revaluation are considerable and unevenly effect different categories of property.
Message
Those attending the Room 151 LATIF Conference recently will have seen an interesting presentation by John Kelly of CCLA on property investment for local authorities.
There was however one slide which has, I think, wider significance. It showed the rise in capital values since 2010. Using this as a guide to possible rental values there seemed to be a considerable difference between the rise of offices, particularly in London and South East (although those elsewhere seemed to have dipped and returned to 2010 values) and a clear poor performance in the retail sector where outside the south east there may even have been a fall in rental values over that time.
This is not certain data and the VOA and the agents for businesses will clearly have better comparables but it does give a clue that authorities who rely on retail as a sector for their business rates could well be losers against authorities with a lot of office space or even industrial properties. That could even have diverse effects within London.
The message is clear that directors of finance need a clear strategy to deal with this revaluation. Waiting until information becomes officially available will leave little time for action. The situation will be confused by a large number of appeals and this could lead to considerable uncertainty spreading over several years
