UK: The HFW Client Briefing: Ports & Terminals Group - August, 2009

Last Updated: 1 September 2009
Article by Annette Roberts

Business Rates - Where Are We Now?

In our article, Bureaucratic maze awaits challenges to UK ports rates1, published in Lloyds List on Monday 15 December 2008, we highlighted the difficulties facing port businesses resulting from the badly considered and poorly implemented introduction of uniform business rates to the statutory ports. At that point, few businesses had become insolvent. Since then, the credit crunch and recession have fuelled an already weak economic situation. Sadly, port businesses particularly now find themselves targeted by insolvency practitioners offering their services. Having discovered that a very dull tax can have huge implications for the viability of a business, port businesses need to be wary of accepting "quick and easy insolvency solutions" which may not be appropriate to their business model.

Although there has been voluble support in both Houses of Parliament to the injustice suffered by the port operators, it is only very recently that a Government heavyweight, namely the Minister Alan Johnson has added his voice to the campaign for relief for port operators from liability to pay separate assessments for business rates from April 2005. The compromise date of April 2008 would be acceptable to some whilst others would prefer April 2010 as the next revaluation date.

Alan Johnson has added his backing to the proposed amendment put forward by Lord Bates to the Business Rates Supplement Bill (the Bill) in the House of Lords. The purpose of the amendment is to prohibit the Valuation Office Agency (VOA) from backdating any separate assessment which arose because of errors made by the VOA. At the last consideration of the Bill by the House of Lords, the House was barred from pressing the cause further because the House of Commons claimed privilege on the basis that it is a revenue bill and the will of the House of Commons which had rejected the amendment must prevail. Clearly the campaign has not yet run its course.

At the beginning of October 2009 the new draft rateable values for the 2010 revaluation will be sent to ratepayers and will be available online at www.voa.gov.uk/2011, in October. The VOA is also providing an online business rates indicator to help forecast the actual rates payable for 2010/2011. These values will be based on market rental values as at April 2008. Some commentators estimate that the average increase in rental value across the UK will be approximately 13% indicating a fall in the Uniform Business Rate to be fixed by the Government to 45.9p in Ł in 2010/11. Nevertheless those properties in areas where rental values have increased significantly will experience increases in rates liability.

On receipt of the new rateable values, port operators should take the opportunity to critically examine the assessments for their properties. The mechanics of the assessments are quite technical. It should be remembered that the current assessments are based on market rental values as at 2003. With the difficulties experienced in the UK economy and the commercial property market, the rental evidence on which the revised values have been reached may be vulnerable to challenge. Also in the interim period between 2003 and 2008 there may have been changes to the amount of space exclusively occupied, for instance, or other important changes in circumstances which could affect the efficacy of an assessment.

If assistance is needed in making the payments it is the responsibility of the port operator to raise the matter with the local rating authority. It is probable, as with previous years, that any increases will be phased in and consultations are taking place as to whether reductions should be effected immediately or also phased in.

There are unfortunately, other taxes causing problems at the ports. The increases in lighthouse dues by way of example, has also been unwelcome. It is fair to say that there is a lack of transparency in the taxes/levies that port operators and other businesses conducted at the ports have to make to the port owners and this has and does cause problems. The storm over port business rates is a very good example. Arguably with a more transparent charging system a port operator would have been able to assess the cost to its business of contributing to the port owner's liability for business rates at the port. In some instances there is no apparent link between port owners property costs and the port operators payments.

Observers tends to overlook that the nature of port operators businesses severely limits the choice of location from which to operate. Port owners unlike most land owners have a very captive market. An examination of the ownership of UK ports shows that a few large players dominate the market. This lack of competition may be a means of persuading a Government being hounded on the unfairness of the implementation of its tax policy in the ports, to investigate the commercial imbalances resulting from the lack of competition and lack of transparency on port charges, in order to demonstrate its fair play credentials.

Footnote

1. This article, written by Stephen Drury and Annette Roberts is available to read on our website http://www.hfw.com/news/articles/2008/bureaucraticmazeawaitschallengestoukportsrates

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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