It’s easy to forget that billing authorities are themselves subject to rateable values on the numerous properties they own. Typical assets include council offices, car parks, schools, libraries, leisure centres, community centres and the more specialist properties such as public conveniences and crematoriums.
In my experience, I estimate the average billing authority is typically paying anywhere between five and 15% on their portfolio of property in increased business rates as a result of not reviewing the rateable values within the list. Within each authority lies a tremendous opportunity to check and challenge these rateable values just like so many of the businesses operating within these authorities do.
Business Rate exemptions and relief
There have been a number of changes in recent years in the methodologies used to calculate rateable value’s and new precedents set by various bills, appeals and case law which once again make this an area worth review. When was the last time you fully assessed your entire portfolio and identified every exemption or relief you may be entitled to? For example, properties within public parks are now considered exempt and shared occupation with other public bodies and/or commercial organisations offer opportunities to those billing authorities who are currently picking up the tab for the whole ratings bill.
Specialised properties such as leisure centres, public conveniences and crematoriums also represent big opportunities for reductions in rateable value because of the method of valuation adopted by the Valuation Office Agency. In the case of crematoriums, a large majority tend not to be run for profit and the method of valuation used is the contractors basis with adjustments allowed for age and obsolescence. Similarly, the Public Lavatories Bill is aiming to introduce a 100% mandatory business rates relief for public lavatories.
Efficient use of council owned commercial properties
In an era where budgets are heavily scrutinised and reviewed, being able to demonstrate efficient use of resources has never been more important. If a council owned commercial property is not fully occupied yet paying full business rates this is clearly a waste of budget and rates mitigation should be looked at or alternative ways to limit rates liability.
Historically there has been the belief when billing authorities are paying rates on their own properties, they are simply taking money from one part of the authority and transferring it to another. This is simply no longer the case following the introduction of the rates retention scheme, where a billing authority now retain a proportion of business rates and in some cases up to 100%. This has meant there is now more impetus in making sure business rates income is accurate including on an authorities own portfolio of property.
For those authorities who have experienced an overall reduction in rateable values since the last revaluation, this has been somewhat dampened by the transitional relief scheme which has been implemented on the 2017 list.
Similarly going into 2020, council owned commercial properties which are in transition will see significant increases in bills as the cap on increases hits its highest amount.
Generating additional income
Regularly reviewing and challenging the rateable value of council owned properties is a healthy way to not only generate additional revenue for billing authorities but as a measurement of efficiency by ensuring the efficient use of the assets they own. If property is not occupied or is under-utilised there is a real opportunity to turn things around by either agreeing discounted rate payments or pushing for full occupancy with third parties who would then be liable to pay the rates bill providing an increase in rates recovery for the billing authority.
Following work we undertook for the 2010 revaluation, we collectively achieved approximately £38m in rateable value savings for billing authorities by challenging rateable values of council owned commercial properties.
Roger Messenger is the senior partner with Wilks Head and Eve