Winners and losers in long awaited rates revaluation
MANY business owners will have recently opened ‘Rent and Leasing Questionnaires' received from Land & Property Services (LPS) regarding the 2020 Non-Domestic General Rating Revaluation. Whilst this correspondence is likely to have been opened with a sigh, puff and a moan about the prospect of an increased rates bill, the revaluation shouldn't necessarily be treated in this vain.
In layman's terms, the Non-Domestic rating system (ie business rates) is based on a hypothetical rental valuation at a fixed point in time known as the Antecedent Valuation Date which is April 1 2018 for the proposed 2020 Non-Domestic Revaluation. Rental evidence from this point in time is used to calculate a hypothetical rent or ‘Net Annual Value' which is in turn used to calculate rates payable through the ‘rate poundage' for the various council districts.
The proposed 2020 Non-Domestic Revaluation will come five years after the adoption of the 2015 non-domestic valuation list, a list that was 12 years (or more) in the making, following the 2003 revaluation which was long past its shelf life. Regular rating revaluations should be embraced by rates payers and the five-yearly revaluation cycle is something which Land & Property Services has been aiming to achieve for years, like its UK mainland counterparts.
Like all non-domestic rating revaluations, there will inevitably be winners and losers, however, regular revaluation periods will help to ensure that sector specific changes in rates liabilities for occupiers are more manageable. In addition, regular revaluation cycles will enable rate payers and LPS to iron out market anomalies on a more frequent basis.
The non-domestic rating system, in theory, should follow the market and the growth in activity and market rents for Belfast's city centre office market has been well documented. As we dust down our crystal ball, we would foresee the office sector perhaps taking a greater share of the rates burden with increases in ratable values expected. On a provincial level, the office sector has been largely stable and we would foresee nominal changes in Net Annual Values.
Rental levels in the retail and industrial sectors, on the whole, have been largely stable and we wouldn't foresee considerable change in LPS values in these sectors. There will, as always, be certain locations that are the exception.
Despite an envisaged increase in ratable values for certain sectors it is too early to accurately quantify how individual rate payers will be affected as the rate poundages are dictated by budgeting and changes in the overall value of the Non-Domestic Revaluation List.
As rate payers contemplate completing LPS Rent and Leasing Questionnaires, we would suggest that care and attention is taken when doing so. Accurate rental details along with details of any incentives or capital contributions received from a landlord should be disclosed to ensure your assessment is fair.
Business rates form a considerable overhead for any business and it is imperative that such liabilities are kept to a minimum. In light of this, we recommend that professional advice is sought when engaging with LPS to ensure accuracy of valuation and that any available rating reliefs are applied where due.
:: Declan Flynn is managing director of Belfast-based commercial property agency Lisney, which works on behalf of many of Northern Ireland's most significant investors and developers as well as major retailers and businesses.