It is that time of the year again, when local authorities throughout the UK despatch the annual rate demand notices to occupiers of non-domestic property. However, this time many businesses could be in for an unpleasant surprise as the effects of the 2000 rating revaluation are translated into increased charges for the 2000/01 tax year. Indeed, it is estimated that following the latest rating revaluation business rates will raise a staggering £16 billion for the Exchequer in 2000/01.
The high level of increases in many of the April 2000 rating assessments is a direct consequence of the fact that the last revaluation took place in a relatively depressed property market in 1993. However, since then rental prices have spiralled upwards, especially in prime locations in London, the South East, the North East, along the M4 corridor into South Wales and in the Midlands.
Rateable values also reflect the type of building assessed for rates, so high-quality retail properties, offices, warehouses and high-tech factories are suffering the same effects too. For example, a typical modern, high-quality office building in London could see an increase in rateable value of 100% with occupiers in prime locations facing increases of as much as 300%.
Fortunately, the Government has implemented a transitional phasing programme which, for the 2000/01 tax year, caps business rates rises in England at 12.5% for large properties and at 5% for smaller properties.
However, even with this scheme in place, annual bills for those facing the maximum increase will rise by 12.5% plus inflation which, for example, could translate into an additional £36,000 a year to pay from 1 April 2000 for an average office in London.
This situation will worsen in later tax years when the limit on rate increases for large businesses in England will rise to 15% plus inflation for 2001/02 and thereafter to 17.5% plus inflation until the 2004/05 tax year. In Wales all large businesses will be expected to pay their additional rating liabilities from 1 April 2000 in full without the benefit of transitional relief.
Faced with this, businesses need to make sure that they are taking full advantage of the available tax reliefs and allowances. Specialist advice should be sought.
For further information, or assistance in making revised claims, please speak to your usual KPMG tax contact.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
