Companies to overpay £221m in business rates as thousands will miss appeal deadline
Over 110,000 firms in England and Wales are likely to miss 31 March deadline for appeals
As companies scramble to claw back overpaid business rates for the 2010-2015 period, research by CBRE, the commercial property and real estate services advisor, estimates that 114,500 appeals will miss the 31 March deadline, costing businesses in England and Wales over £221 million in overpaid tax.
Since the latest tranche of business rates was announced in 2010, over 670,000 appeals have been lodged with the Valuations Office Agency, of which over a quarter (28%), have successfully led to a change in tax payable1. Those successful can expect an average 11% reduction in their bill to local authorities2, extending back retrospectively by up to five years.
Successful appeals typically need to provide evidence that the Valuation Office’s estimated rental value (ERV) for the property, calculated as at 1 April 2008, is wrong. Other factors leading to a reduction in rateable value stem from a material change in circumstances at the property, such as disruptive road or building works, or a new shopping centre in the area, causing a reduction in footfall for existing retailers.
Over 936,000 appeals were lodged against the 2005 rating list, with close to one in five (17.8%) made in the six months leading up to the deadline. CBRE forecasts that the 670,000 appeals made against the 2010 rating list by the end of November 2014 will climb to over 820,000 in the coming fortnight. If the total number of valid appeals lodged against the last list are a yard stick, it is estimated that 114,500 appeals will not file in time. Even this is a conservative estimate given the growth in the number of rateable properties in the UK. At the most recently reported appeal success rate1, that’s at least 32,000 missing out on a tax reduction.
George Osborne introduced a change3 to business rate appeals in the Autumn Statement 2014, limiting those lodged after 31 March 2015 deadline to rates paid from 1 April 2015, significantly shortening the period businesses have to claim back for overpaid tax.
Jonathan Kinsey, UK Head of Rating and Taxation said: “We always expect to see a spike in appeals in the run up to the deadline, but unfortunately there are still thousands of companies who will miss out on what could be a significant reduction in their business rate bill. With so many SMEs still finding their feet following the financial crisis, a successful rate appeal could have a material impact on a company’s ability to survive if not succeed in today’s competitive marketplace.
“I would urge those that haven’t already looked at their rateable value to do so right away. The deadline on the 31 March is for appeal applications, not the completion of a Valuation Office alteration, so there is still time to review and protect your position.”
1 Valuation Office Agency. Non-domestic rates (business rates): local rating lists (experimental) 27 November 2014
2 Average saving by CBRE in 2014
3 Business rates appeals: backdating - the Government will change the rules so that alterations to rateable values can only be backdated to the period between 1 April 2010 and 1 April 2015 for ratepayer appeals made before 1 April 2015 and Valuation Office alterations made before 1 April 2016. Ratepayers will continue to be able to appeal a valuation on or after 1 April 2015 but any change as a result of the appeal will only be backdated to an earliest date of 1 April 2015.