Welsh winners and losers in 2017 Rates Revaluation

Jon Ely, Cushman & Wakefield, Cardiff

Business Rates have been making front page news in recent weeks. Jon Ely, Head of Cushman & Wakefield’s Rating team in Wales and the South West summarises the main issues and what it means for Welsh ratepayers:

“On the 1 April 2017 the first rates revaluation for seven years comes into force across Wales, Scotland and England. The current 2010 Rating List and rateable values reflects the property rental market at April 2008, whereas the upcoming 2017 Rateable Values reflects rents as at April 2015.

Revaluations are fiscally neutral raising no additional revenue in real terms for the Government.  However it does result in the reallocation of rates liability across all ratepayers according to the relative shifts in rateable values. Consequently where rents have risen between April 2008 and April 2015, rateable values will similarly increase and vice versa.

Due to there being a seven year gap between revaluations there is a greater risk of larger shifts in rateable values leading to significant fluctuations in rates liabilities  It is these sudden and large liability changes which are creating so many problems for ratepayers and leading to such vociferous outcry from businesses whose rates liability is due to increase significantly.

In Wales, the total rateable value will fall by 2.9% and this is the key benchmark to compare individual rateable value changes to largely determine whether a rates liability will increase or fall in April. However the average 2.9% fall hides much regional and sector variation.

Retailers in Cowbridge and Monmouth will be aggrieved that their Rateable Values are set to increase by as much as 25% and 60% respectively, particularly at a time when consumer shopping habits appear to be moving away from traditional bricks and mortar to online. Many online retailers with no high street presence will see a fall in their rates liability for many of their distribution centres.

The Welsh Government has made an effort to alleviate some of the burden for small businesses who have seen increases in rates liability through the continuation of small business rates relief, a government funded transitional scheme and a £10m High Street retail relief scheme.

However it is not only high streets that will be feeling pain. The NHS’s financial struggles have been well documented in recent months and to add to this The University of Wales Hospital Cardiff and Llandough Hospital will see an average increase in Rateable Value of 33%. We calculate this will result in the hospitals having to find an extra £3.5m over the duration of the 2017 Rating List.

The UK Government has sought to revamp the current business rates system, culminating in the widely criticised Check, Challenge, Appeal (CCA) process being introduced in England from April.  The general consensus on CCA is that it places even more burden on ratepayers to challenge their assessment, is cumbersome and time consuming.  A consultation paper on reforming the appeal process in Wales will be issued in the spring with any amendments to the current system scheduled to implemented from April 2018. The outcome of this consultation is unlikely to be as onerous to the ratepayer as check, challenge, appeal in England. It would therefore appear advisable to make 2017 rating list appeals before then.

With only a couple of weeks to go until the 2017 Revaluation, business rates will no doubt continue to occupy the front pages of the national press, as this is one of the most divisive revaluations in a generation.”