The impact of changes to business rates

  • 27th February 2024

Andrew Altman, partner at Gerald Eve, discusses the impact on the education sector of recent changes to business rates

Andrew Altman

Business Rates are one of the largest bills any organisation can face, and there have been some recent changes with the closing of the 2017 Rating List and the start of the 2023 Rating List.

Many schools challenged their 2017 Business Rates before the 31 March 2023 deadline and the Valuation Office is still working through a back log of appeals.

The Rateable Value is essentially a rental value of ‘non-domestic’ property (boarding and staff accommodation falls under Council Tax).

Gerald Eve worked together with two other firms to agree a national basis with the Valuation Office, applicable to the majority of independent schools in England and Wales, where there is no rental market and the rating valuation is linked to rebuilding costs.

And this has been very beneficial to the sector, with refunds back to 2017.

For schools in central London and some other city centres, where there is a clear rental market for schools, the Rateable Values are based on that evidence and the scope for appeals has been more limited.

A cautious approach

Although some substantial rates refunds have been achieved for our school clients, we have had to be cautious where new buildings and extensions have been omitted.

Where the Valuation Office has failed to catch up with changes, it can still backdate increases as far back as 2017, but this opportunity will close very shortly on 31 March.

Although, of course, schools want to save money, most also value advice on budgeting, accruals, and risk and a new ‘Duty to Inform’ brought in with the new Rating Act in November last year is starting to cause some concern.

The details are to be confirmed by regulations and although the requirements to be imposed on ratepayers are still quite uncertain, it seems likely that some kind of annual declaration will be required.

This is the first time (in a tax dating back more than 300 years), that ratepayers will be required to declare information to the Valuation Office on new buildings, extensions, and other changes at their premises.

Establishing the evidence

The 2023 Rating List took effect on 1 April last year with a new set of Rateable Values and fresh opportunities to appeal.

But, with above-average increases in most cases, compared to other sectors, Business Rates continues to be a concern, particularly with the continued threat to the Charitable Relief (already lost in Scotland).

We have compiled details of the new school valuations and are establishing what evidence there may be to mount another round of appeals.

We are also considering whether some alternative basis of assessment may be appropriate, perhaps linked to trading potential, as the current basis, linked to building costs, means that Rateable Values for schools rise, even if rental markets generally are falling. The Rateable Values reflect rental markets at the 1 April 2021 ‘antecedent valuation date’ – a difficult date because some elements of COVID lockdown were still in place (there is a lot of national debate around this at the moment).

The more interest from schools, the more that Gerald Eve and other main firms can resource this research and carry out discussions with the Valuation Office nationally, as we have done for each rating revaluation since 1990.

For schools in England and Wales to access their 2023 valuations (and to appeal in due course, as appropriate) they need to be registered on the Valuation Office part of the Government Gateway.

This can be difficult to navigate, but we have a guide to the process.

There is currently no deadline for appeals in England and Wales in most cases, but unfortunately the extremely-tight timescale for Scottish schools passed last summer.

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