There have been a number of developments on business rates which
affect investment management and lettings to corporate occupiers.
Exactly what use qualifies as charitable and benefits from reduced
rates is clearer, as is what qualifies as a business unit in a
multi-let building plus there is disturbing news on rates
Charity Rates Relief Guidance
During the toughest phase of the recession, lettings to
charities for a nominal rent gave investors of vacant properties
the benefit of no longer paying business rates, but questions arose
over the use of these leases especially where the landlord paid the
charity a contribution based on a share of the cost of the saving,
and over some charities that did not fully occupy the leased
properties or only occupied them inefficiently. Could these
We now know:-
the premises must be wholly or mainly used for charitable
activity. It is not enough that the activity conducted on the
premises is wholly or mainly charitable eg. a charitable activity
on only one floor of an eight storey building will not attract
charitable relief, even if the charitable activity is the only
activity being carried on in the building;
however, if the premises are being used wholly or mainly for
charitable purposes, it does not matter that they could have been
run more efficiently or that strictly only part of the premises
need have been used. The fact that the purpose of the arrangement
between the landlord and the charitable tenant is to reduce or
avoid the payment of business rates is immaterial;
a building can qualify for charitable rates relief even though
not every square metre of floor space is in constant use all the
time, eg. a spacious office which is not crammed with people
working for these purposes is wholly used as an office..
Conclusion: the charitable use must usually occupy more than 50%
of the building for the purpose of attracting charity rates relief
and it will depend on the facts of each case not a strict floor
area measurement of the actual space taken up by the activity.
Multi-Let Properties – be aware
Last year the Supreme Court decided that two separate floors in
the same building were not a single hereditament for rating
purposes. Now the VOA has issued guidance to the effect that it
will treat different areas of the same building which are accessed
through communal areas as separate premises for business rates
purposes. This is a change from the VOA's previous
approach of valuing separate but adjoining areas occupied by one
business as a single unit for rating purposes. Any adverse
valuation impact achieved as a result will be backdated to the most
recent of the date of occupation and 1 April 2015 in England (but 1
April 2010 in Wales).
What is more, whilst the VOA is currently working towards the
2017 revaluation, how and when the separate assessment will be
applied remains to be seen. The concern for property occupiers is,
therefore, that they will have to make provision for backdated and
future rates liabilities.
Government's Proposal to Limit Power to Appeal Business
Draft regulations for England put forward by DCLG propose to
reform the business rates appeals process by preventing the
Valuation Tribunal from amending the rateable value of a business
unless it is "outside the bounds of reasonable professional
Top rating experts have suggested that this could well mean that
the Valuation Tribunal would now be directed to rule that a higher
rateable value should be allowed to continue just because the
figure put forward on appeal is within the same
"ball-park", ie. 10 to 20 per cent, and businesses
affected would then be stuck with the higher valuation for 5
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