Business Rates in East Cambridgeshire Monday 31 January 2011

NON-DOMESTIC VALUATIONS FOR RATING Make business rates your business Mark Catley MRICS FAAV Valuation Officer, St Albans Group Duncan McLaren MRICS Dip Rating Team Leader, Rating Cambridge Valuation Office Agency

What the VOA does  Central government Executive Agency  Professional property valuations:  1.8 million non-domestic ‘rateable values’ for business rates  22 million domestic council tax bands  153 local housing allowance zones  75,437 (2008/09) fair rents for private rented sector tenants  Property valuations for HMRC tax purposes  Strategic asset management and energy performance certificates for the public sector

Business rates – the basics  Tax paid on business premises and other non-domestic properties  Nationally pooled, then redistributed between local authorities in proportion to adult population  Funds contribute directly toward cost of local authority services  More information at:

Business rates – who’s who  Valuation Office Agency  assesses rateable value  Communities & Local Government / Welsh Assembly Government  sets policy framework, rate reliefs and national multiplier  Local Authority  uses rateable value in calculation of rates liability, applies reliefs/discounts, issues bills and collects payments Business rates bill EXAMPLE rateable value£20,000 multiplier £0.414 bill total £8,280 This is set by the government This is calculated and collected by East Cambridgeshie District Council This is set by the Valuation Office Agency

The size of the task – nationally Total of 1,793,967 properties to value bulk” classes to be valued include: 510,000 shops (including banks, post offices, etc): 287,000 offices; 195,000 warehouses; 242,000 factories, stores, etc other classes with significant numbers: 66,000 licensed properties; 41,000 advertising rights; 47,000 car parks; 38,000 hotels; 33,000 restaurants/cafés; 30,000 schools and colleges; 28,000 hospitals/clinics “non bulk” classes include: everything else from A to Z (airports to zoos)

The size of the task – Cambridgeshire bulk” classes to be valued include: 5,480 shops (including banks, post offices, etc): 5,525 offices; 2,900 warehouses; 3,800 factories, stores, etc other classes with significant numbers: 805 licensed properties; 345 advertising rights; 180 car parks; 270 hotels; 40 restaurants/cafés; 750 schools and colleges; 390 hospitals/clinics “non bulk” classes include: everything else from A to Z (airports to zoos)

The size of the task – East Cambridgeshire Total of 2,250 properties to value bulk” classes to be valued include: 425 shops (including banks, post offices, etc): 340 offices; 265 warehouses; 380 factories, stores, etc other classes with significant numbers: 80 licensed properties; 5 advertising rights; 20 car parks; 25 hotels; 40 restaurants/cafés; 65 schools and colleges; 35 hospitals/clinics “non bulk” classes include: everything else from A to Z (airports to zoos)

How do we value?  Rateable value is our assessment of the rental value as at 1 April 2008  Gather and analyse rental evidence and property information to set rateable values  In some cases we use trading receipts to establish rateable value…  …in others we use building and land costs  Aim is always to establish rental value

Applying the rateable value  For offices and industrial properties, rent generally distributed across different parts of the property on £/m² basis workshop areaoffice

Shops are slightly different…  In a shop the front part is the most valuable – this becomes zone A  £/m² reduces across the retail area as you move further back from the front A B C retail area office storage

1990 Revaluation  The five-yearly revaluation maintains fairness in the rating system by redistributing liabilities according to any differential movement in values that has occurred in the market over the five-year period  Has taken place regularly since

Not about increasing taxes!  An increase in rateable value does not necessarily mean an increased rates bill  The national multiplier (UBR) is the other key factor used by local authorities to calculate rate bills  Multiplier adjusted so that the total business rate stays the same, only allowing for inflation  In England the multiplier for 2010/11 is 41.4p, down from 48.5p in 2009/10  In Wales the multiplier for 2010/11 is 40.9p, down from 48.9p in 2009/10

1 April 2008 values – why?  Date fixed two years in advance to ensure that information to support the valuation process is available  Common date ensures fairness and is the same for all ratepayers  Rental values in 2010 may be lower than they were in 2008 but:  2010 multiplier significantly reduced  rates bill depends on relativities across all rateable values at valuation date, not on changes in the rental market between 2008 and 2010

Business rate reliefs and discounts  Transitional relief for 2010 list  Small Business Rate Relief  small business rate multiplier  percentage discounts  Additional reliefs for charities, some non-profit and some rural businesses

Ensuring accuracy  Use wide variety of evidence of actual rents paid  Research the rental market  Valuations carried out at local level Valuation date  May be seen as a ‘high’ point in the market  Multiplier has been reduced to ensure no extra money is raised at national level  Changing the date would mean the multiplier not reduced so much  Date is just the point to identify relativities

Ensuring accuracy  Use wide variety of evidence of actual rents paid  Research the rental market  Valuations carried out at local level Valuation date  May be seen as a ‘high’ point in the market  Multiplier has been reduced to ensure no extra money is raised at national level  Changing the date would mean the multiplier not reduced so much  Date is just the point to identify relativities

Situation at 1 April 2008  Economic slowdown – but how much?  B of E base rate 5.25%  Stock Market – FTSE 5701  Northern Rock nationalised 18/2/2008  Prospects for Property  Estates Gazette 26 July 2008 “Incentives up as interest on the wane”  Empty Property Rate introduced wef 1 April 2008  Quote by Bidwells [Data Book no 15] from Dec 2007  “The slowing economy is likely to hit across all regions as tightening credit markets make it more difficult to finance large-scale investment projects. Despite this, occupational markets have remained healthy, with rents growing in most sectors.”

Since AVD?  21 April - B of E and Treasury pledge emergency funding to banks  1 May - “worst of credit crisis may be over” (B of E report)  ‘Melt down’ week:  14/9/08 - collapse of Lehman Brothers  17/9/08 - Lloyds comes to rescue of HBOS  19/9/08 - US officials are working on a plan costing billions of dollars to help rid US banks of their bad debts  21 October – the ‘R’ word first used by Mervyn King  6 November – B of E cuts base rate by 1.5%  23/1/09 – UK officially enters recession as GDP falls by 1.5%  Currently base rate at all time low of 0.5% Can these be reflected?

Conclusion  Standing at AVD on 1 April 2008 looking forward in the light of what has happened up to that point and making reasonable assumptions as to what might happen in the future, what rental deal might a willing landlord and willing tenant have agreed?  The landlord cannot put off the decision until another day because of uncertainty – and neither can the tenant! Cannot wait for market to settle. The deal is to be done on that day.  The events of the past year or so, therefore, have to be disregarded as they took place after the AVD and indeed were probably unforeseen as at the AVD – in terms of value.

Impact on property market  Greater uncertainty  Companies retrenching  Falling demand for property  Oversupply of property  Proliferation of incentives on new lettings  Less transactions  End result:  Less evidence to have regard to  Evidence more difficult to analyse and to convert to the statutory terms

Checking your rateable value

Raising a query  - check details, compare with others, and get in touch  Let us know of any factual errors  If you have evidence to suggest the value is wrong, share it with us as soon as possible  Professional advice is your choice  Be wary of cold callers  Fact sheet available

Further information  Checking your rateable value  Information on the whole business rates system and an indication of individual rates bill  Central government departments with responsibility for business rates

Getting professional advice  Make a choice, not a mistake  Guidance is available on how to chose a professional ratings advisor

Getting professional advice  If you seek professional advice ensure they are reputable  Royal Institution of Chartered Surveyors (RICS)  Institute of Revenues Rating and Valuation (IRRV)  The Rating Surveyors’ Association  Don’t pay or sign until you are completely sure

Questions?