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• Last minute rush to make appeal before new rates become effective on April 1 2010

The number of business rates appeals has jumped 21% over the last two years driven by the recession and the introduction of business rates on empty property, says NB Real Estate, the leading commercial property agency.

According to statistics obtained by NB Real Estate under the Freedom of Information Act, the number of appeals received by the Valuation Tribunals regarding business rates soared from 97,700 in 2007 to 118,500 in 2009.

NB Real Estate says that the increase of empty rates in April 2008 has led to a huge rise in appeals as businesses struggle to pay their bills in the recession.

NB Real Estate says that the surge in the number of appeals also partly reflects a last minute rush by companies to appeal the current rates before the new rates take effect on April 1 2010 and possibly obtain a rebate on the rates for the last five years.

What are business rates?
Businesses that occupy a commercial property are subject to business rates as a contribution towards the costs of local authority services. The amount of business rates is based on the rateable value of the property, which is equal to its annual market rent at a particular date. Rateable values are reviewed every five years by the Valuation Office Agency (VOA).

The rateable values were last updated on April 1 2005, based on market rents at April 1 2003. The new rateable values, which are based on market rents at April 1 2008, will be effective from April 1 2010.

What has changed in empty rates relief?
Before April 1 2008, vacant commercial properties could benefit from a 50% relief on their business rate charge, except from industrial properties, which were entitled to 100% exemption.

Since April 1 2008, commercial properties are only exempted from business rates for the first three months that they are empty (first six months for industrial properties) after which business rates are fully payable.

Comments John Powell, Director at NB Real Estate: “Business rates appeals are generally made in the first two years following a revaluation and tend to tail off thereafter. But with the change in legislation on empty rates combined with the fact that companies were scrutinising their bills more closely in the recession, this has led to a sharp upturn in appeals over the last two years.”

“Latecomers who wished to grab the last chance to file an appeal before April 1 2010 - the cut-off date for appealing the 2005 rates - may also be partly responsible for this upturn in appeals.”

NB Real Estate says that businesses can appeal business rates if they think the rateable value of their property is wrong.

Comments John Powell: “The Valuation Office faces a huge and complex task in assessing rateable values, so it is no surprise that a fair percentage turn out to be incorrect. This is why businesses should always check that they are paying the appropriate rates for their property - and if they’re not, they should appeal.”

“There are many grounds on which businesses can appeal business rates. For example if they think that the amount of floor space was incorrectly assessed or the rental values attributed to the different parts of the property are inaccurate.”

John Powell explains that different parts of the premises may be valued differently according to the way they are used. For example, the front part of a shop usually has a higher rateable value than storage space.

John Powell adds: “In some cases property owners may also argue that they should not be liable to rates at all. For example if a building has fallen into such a state of disrepair that it is impossible to let it, its rateable value is equivalent to zero.”

“Letting a property fall into decay could be seen as a mild way for empty property owners to avoid having to pay empty rates - the radical way being to knock down the building altogether.”

15 million sq ft of property had been demolished to avoid empty rates just one year after the tax was introduced, according to the British Property Federation.