Rates and taxes

Business rates: cheers...

Publication November 2017

What is the rateable value of an unoccupied commercial building that is in the course of being redeveloped or substantially refurbished? This critical question for commercial property developers has finally been resolved by the Supreme Court in Newbigin (Valuation Officer) v S J & J Monk (a firm) [2017]. 

The ratepayer owned the freehold of an office building and employed a contractor to carry out extensive renovation and improvement works throughout the premises.

The ratepayer, wishing to reduce its liability to business rates while the premises were being reconstructed, argued that the premises should be rated on the basis of their actual physical condition. The valuation officer contended that rates should be calculated on the assumption that the premises were in reasonable repair.

The Supreme Court agreed with the ratepayer with the result that the rateable value of the premises was reduced from £102,000 to £1.

…….dismay…..

Contrast this with the Supreme Court decision of Woolway v Mazars [2015]. Here it was decided that two floors in an office building that were occupied by the same tenant but were not adjoining and only connected by a series of lifts in the common parts were to be treated as two distinct taxable units, resulting in a considerable increase in the overall rates bill.

Mazars has resulted in a recent revision in the way the Valuation Office Agency calculates business rates where a tenant occupies separate spaces in an office or other non-domestic building, often resulting in a considerable increase in the overall rates bill. Business tenants should bear this in mind when devising their occupation strategy, as should landlords and developers when designing the lay-out of business premises.

…….and uncertainty

With the Autumn Budget set for 22 November 2017, industry groups such as the British Property Federation have been lobbying the Chancellor to cap a significant increase in business rates scheduled to take effect in April 2018. There are also calls for more detail on the government’s commitment to review the business rates regime.

Some reports also predict a possible Budget announcement on Stamp Duty Land Tax and the Community Infrastructure Levy – we can but wait and see.

For further information please contact Sian Skerratt-Williams or your usual contact at Norton Rose Fulbright.


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