As this issue of Forecourt Trader went to press the Government had just published the headline figures on the results of its revaluation of business rates, and forecourt owners were waiting to see how their bills in April 2017 were likely to be affected. It reported that rateable values in the retail sector were set to increase by an average of 4.7%, although this was heavily influenced by a 26.2% increase in rateable values in London, with most regions in England and Wales seeing a decrease. There is also due to be a reduction of 1.7p from 49.7p in the standard rates multiplier.
PRA chairman Brian Madderson said that individual site’s rateable values (RVs) were revealed on September 30. However, several issues have still to be settled and he added: "It could be towards the end of the year before they know what they are going to pay." He said there was still a major unfairness in the way forecourt shops were assessed compared with convenience stores.
Forecourt shops are assessed on turnover, while c-stores are assessed on their square footage. This means a c-store could be paying far less than a similar shop on a forecourt while having a far higher turnover.
Paul Sewell, managing director of rating specialist MUA Property Services Ltd, which has worked closely with the PRA, said for individual sites it depended on how trade had varied since the last valuation, but overall he expected a modest rise in filling station RVs.
The VOA (Valuation Office Agency) considers three main factors when assessing a filling station; the shop, car wash and fuel volume. It has not changed the way it assesses the first two since the 2010 valuation, but it has tweaked its assumptions on the margin on fuel from 3ppl to 3.5ppl, so this would bump up RVs where volumes have risen.
For businesses whose bills have changed substantially between 2016 and 2017 the situation is complicated by the transitional arrangements. If the bill has increased or decreased substantially the government limits the change that any business can experience year-on-year. These transitional arrangements cushion any substantial increases, but also limit the rate that any decrease can be applied over the next five years.
The arrangements favour smaller businesses compared with larger ones. For a business with an RV of £100,000 or more the transitional relief in 2017 will cap any increase in the bill at 45%, while in 2018 the cap is 50%, meaning such a company’s bill could double in just two years. But for a company with an RV of less than £20,000, the limit is 5% in 2017 and 7.5% in 2018, meaning it could be a number of years before it pays its full bill. The favouritism towards smaller businesses also extends to companies receiving a lower bill than previously.
Decreases for companies with an RV exceeding £100,000 are limited to 4.1% in 2017 and 5.6% in 2018, meaning it could be years before they reach their true figure, while the limits for companies with an RV of less than £20,000 are 20% in 2017, and 30% in 2018.
Sewell said small business rate relief is another benefit which is being enhanced for smaller companies in 2017, but emphasised that it only applied to businesses with a single property. Currently any business with an RV of £6,000 pays zero rates, and this progresses proportionately up to £9,000 RV where they pay the full amount (ie a company with an RV of £7,500 pays 50%).
From April 2017 any company with an RV of less than £12,000 pays zero rates and this progresses up to £15,000 where they pay the full amount. For instance, a site selling 1.5mlpa at national average prices, with a shop turnover of £5,000 a week and no car wash, could expect an RV of just less than £11,000, meaning it will move from paying full rates to zero rates next year.
But while the Government has been making concessions for smaller businesses, the VOA believes it has spotted a way of squeezing more money from sites with an ATM. The VOA recently began treating some ATMs as separate properties for rating purposes, resulting in substantial bills for the filling stations affected.
An alliance of retailers and ATM providers challenged the decision, but a tribunal ruled in the VOA’s favour. An appeal has been lodged, but even if it is successful there are several higher tiers of justice which could delay a final decision for a considerable time. Sewell says this is causing problems for some filling stations which have appealed to reduce their RV, because it is difficult to settle if a site with an ATM is involved.
Appeal proposals challenged
The PRA is one of a wide range of business lobby groups urging the Government to abandon "unjust" proposed changes to the business rates appeal system. A number of business groups have written to Communities Secretary Sajid Javid, urging him to scrap plans to overhaul the grounds on which companies can appeal rating decisions.
In an effort to accelerate decisions, the Government proposed introducing a law that would mean the Valuation Tribunal for England (VTE) would only be able to order a change to the rateable value of a property if it was decided that the existing valuation was "outside the bounds of reasonable professional judgment". Currently the VTE is able to order changes wherever it thinks it is appropriate.
PRA chairman Madderson said: "If this measure is designed to curb the number of appeals it is neither fair nor reasonable." Opponents argue that introducing statutory limitations could lead to a host of legal challenges and companies could sink into hardship if they are required to overpay the tax for several years without a means of challenging the rating system.
"Businesses that are already struggling may be pushed into insolvency, with smaller businesses particularly at risk", a range of groups wrote in a letter reported by The Sunday Telegraph. "Such an outcome would be wholly unjust to ratepayers who have successfully made their case to the VTE for a change to their business rates bill."
The groups added: "We can think of no other circumstance within the UK tax rules where an independent tribunal could determine that a taxpayer’s liability is excessive, but then be prohibited by legislation from determining the correct figure."
The Association of Convenience Stores has called on the Department for Communities and Local Government to ensure that small businesses do not lose out as a result of plans to allow local authorities to keep 100% of their business rates income. Under the proposals, local authorities will be incentivised to permit large business developments to retain the extra business rates revenue. In its submission to the consultation on rates retention, ACS has raised concerns that local authorities do not currently use the powers they have to reduce rates in their area, and that rates retention will do little to incentivise small business growth.
ACS chief executive James Lowman said: "Business rates are one of the biggest fixed costs for thousands of retailers, especially those trading in urban areas and on petrol forecourts. We believe that the business rates system needs to incentivise growth in both large and small businesses, which is why we have called on the Department for Communities and Local Government to ensure that when local authorities gain more power over rates in their area, they use those powers to decrease the rates multiplier and to use discretionary rate relief to drive investment."