Considering the impact of rate revaluation on BIDs
by Jerry Schurder
Judging by the range of business rates questions I have been asked by BID managers for some months now, the 2017 revaluation, which comes into force on 1 April, has been the cause of considerable uncertainty and concern. Initially, those working up renewal proposals needed professional insight into how assessments might change, in order to determine whether to link levies to the 2010 or 2017 rateable values.
Since publication of the draft 2017 valuations on 30 September, emphasis has shifted to concerns about:
- how the significant change in assessments, both up (especially in Central London) and down (most notably in the north, but not exclusively) will impact on business rates payable, given the fiendishly complex and pretty unfair transitional arrangements scheme,
- the implications for BID levies, and
- whether the Government’s plans for 100% rates retention (now contained within the Local Government Finance Bill) including the opportunity for some authorities to impose a supplement to fund infrastructure projects will affect business support for BIDs.
The truth is that existing BIDs have little flexibility in the way they cater for revaluations unless explicit provision was made in the proposals document upon which ratepayers voted to amend the levy and base it on the new revaluation assessments. I am not aware of any that have such a provision. Without it, the only way in which the new valuations can be used is to put such a proposal to levy payers in a formal alteration ballot which, given the cost, time and risk of rejection, seems unlikely to be a realistic proposition.
So what will the impact of rate revaluation on BIDs be?
The upshot is – as a minimum – confusion among businesses when their rates bill is based upon the 2017 RV and the BID levy continues to use the old 2010 assessment. Of greater importance is the likely perceived unfairness especially when 2017 RVs are considerably below 2010 valuations, reflecting rental decline through the recession. There are many high streets in the north where values have fallen by up to 50% and levy payers will view the continued use of 2010 RVs as onerous and unjust.
Another feature of the 2017 revaluation is that, as a generality, the assessments of restaurants and convenience supermarkets have increased considerably relative to unit shops. In my research for a presentation to the Waterloo and Southwark BIDs I came across a Sainsbury’s Local whose assessment leaps fivefold – their BID Levy remains fixed however and this inability to recalculate BID liabilities in relation to the new valuations leads to a perception of inequity.
Only time will tell whether the continued success of BIDs is at risk from the new infrastructure supplements that combined mayoral authorities will be able to impose, following consultation, once the Local Government Finance Bill is passed and implemented. There is bound to be nervousness from businesses who can ill afford additional costs on top of the national living wage, apprenticeship levies and the uncertainty surrounding Brexit. I think that there will be hesitancy from councils as they adjust to the new devolved business rates scheme and life after Brexit, so it will be some while until infrastructure levies kick in meaningfully.
Jerry Schurder is Head of Business Rates at Gerald Eve LLP. Find out more about Jerry here.
You can also find out more at the Gerald Eve business rates microsite here.