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Pay the correct business rates
The way we use offices has changed. The effects of COVID-19 and remote working mean that the value of offices has shifted. With the unprecedented changes in the office sector, both landlords and occupiers face increasing costs and complexity in managing business rates.
The COVID-19 pandemic brought about a significant shift in the way people work, and limited office transactions at a time of uncertainty, leading to fluctuations in office rental values. Our analysis shows that there were significant variations between the 2017 and 2023 Rating lists and rolls. The offices sector had an average 6.4% increase in Rateable Values across England, Scotland, and Wales, with specific locations varying considerably. For instance, office values in Watford increased by over 60%, and prime offices in Leeds saw their values rise by 25-30%. With the changing dynamics within the sector, there is an opportunity to check whether the values assigned are correct.
A trend accelerated by the Pandemic has meant that increasingly traditional office spaces are no longer as desirable, so landlords have to adapt to attract tenants. Occupiers are seeking collaborative spaces, green spaces, and offices that reflect their brand identity. Hybrid working has also led to a reduction in the size requirements for office spaces. This ‘flight to quality’ means that occupiers are looking for smaller, higher-quality spaces. With each property being unique, Rateable Values need to be reviewed to ensure accuracy for the 2023 Rating lists and rolls. With the ‘flight to quality’, the secondary and tertiary spaces have quickly become undesirable, and their values are falling. If Valuation Officers and Scottish Assessors have been unable to review each of these unique properties, occupiers should take the initiative to do so themselves.
Landlords are facing significant challenges with secondary space, leaving them with the choice of redeveloping or leaving their properties empty. This places a heavy burden on landlords, investors, and developers, who are required to pay full empty rate liability after the initial relief period, with no tenancy in place. However, for those who choose to redevelop or refurbish their properties, there is an opportunity to remove assessments and liability from the rating list entirely during the construction phase. With rates being one of the biggest overheads for landlords, the savings can be substantial.
The Minimum Energy Efficiency Standards (MEES) and Energy Performance Certificate (EPC) regulations are having a significant impact on the office property sector, felt by both landlords and tenants. This increasing focus on sustainability means that sustainable additions to buildings will eventually become rateable. This will likely result in increased costs for occupiers in the long run. However, there may be an incentive to make sustainable additions now before they become rateable. While there could be an argument in the future around ‘beneficial occupation’ and the requirements for efficiency, from a rating perspective, the long-term benefits of sustainability measures will likely outweigh the added cost.
Non-Domestic Rating Act 2023
The Non-Domestic Rating Act 2023 will introduce potentially onerous mandatory obligations on ratepayers to regularly update the tenure and physical details of all properties within their portfolios with the Valuations Office Agency (VOA).
Increasing the administrative burden on businesses, it will require prompt updates to the VOA and annual returns even where there are no changes, with penalty risks for non-compliance. The complexity of business rates management will increase with measures anticipated to be fully in place for the 2026 Revaluation.
Material Change of Circumstance (MCC)
Legislative changes to Material Change of Circumstance provisions took immediate effect in October 2023. They tighten the scope of MCCs in England so that new legislation, licensing regimes and guidance from public bodies will not be grounds for a change in Rateable Value between revaluations.
Completion Notices
For buildings that have been temporarily removed from the rating list during redevelopment, billing authorities will be able to issue Completion Notices in the same way as for a new building. The regulatory changes should be in effect from January 2024.
Empty Rate Relief
The Business Rates Avoidance and Evasion Consultation closed at the end of September. The consultation document covered various forms of empty rate mitigation, which central and local governments are seeking to remove or limit, and it sought views on how reforms should be implemented. Measures under consideration include:
Since January 2023, Scotland’s new legislation has transferred Valuation Appeals to the Scottish Courts Tribunal service. This entails strict deadlines and rigorous requirements for ratepayers and advisors. All appeals against valuations from April 2023 should have been submitted as a comprehensive case with supporting data by 31 August 2023. Learn more about how to appeal business rates in Scotland >
Our team of specialists in office business rates possesses extensive experience and expertise in the industry. Along with our state-of-the-art market data, we work towards delivering effective outcomes for our clients. Discover how our team can assist you in navigating the intricacies of business rates.
We know when to appeal and when to leave well alone. Our experience of a diverse range of properties and locations across the UK gives us a tangible edge in our negotiations. This insight and our forensic attention to detail translate into successful appeal strategies.
We are one of the leading specialists in business rates for serviced offices, an increasing proportion of the offices market. We focus on harnessing small business rates relief, empty rates relief and managing rates payment services for both our occupier and landlord clients.
We can provide certainty with the accuracy of rate bills and account for future new builds and other changes in your accrual reports, which are crucial when budgeting for new sites and capital investments.
As well as advising on the impact of physical changes, including demolitions and temporary disturbances, we also work closely with the Valuation Office Agency and Scottish Assessors Association to manage and, where possible, ‘prior-agree’ alterations to assessments to reflect these changes.
Whether your property is empty, mothballed, to be refurbished or redeveloped, we advise on and manage the removal of assessments from the very beginning of the strip-out process. Major changes are expected to this area of business rates in terms of relief available and it is therefore vital you are aware of the latest opportunities to save money.
We are at the forefront of devising innovative strategic solutions to problems posed by changes to legislation. We ensure all available and applicable reliefs are properly applied.
With buildings such as data centres or disaster recovery spaces, plant and machinery can form a significant part of the rating assessment. We can provide a detailed review of the assets valued and whether they are correctly included. This is a highly specialised area of business rates with complex regulations determining the rateability of plant and machinery. Our experts deal with some of the most complex facilities in the UK and have led in developing case law within this area.
As residential use can sometimes form part of a historic or converted property, this can incur Council Tax bills, which we manage or resolve through the Council Tax teams at Local Authorities and the Valuation Office.
We offer the market-leading rate payment management service to ensure you only ever pay the correct rates liability.