Changes in Business Rates

With the revaluation of business rates coming into effect in 2017, there has been much discussion around the subject. However, there are more changes than the most obvious increase in the rates which most areas will be experiencing. In George Osborne’s budget announcement, we saw a number of changes which will benefit the smaller occupier. For example small business rates relief has moved from 50% to 100%, and will now apply to any property with a rateable value of £12,000 or less. Previously, this only applied to properties with a rateable value of £6,000 and less.

Another change is that the increases in line with the Retail Price index now will be matched with the Consumer prices Index, a change coming into effect in 2020. This change will most likely slow down the increase in rates.

A negative change for the occupier is the way office space over multiple floors with one occupier is valued. Historically, offices with one tenant residing over several floors have been valued differently, as the general assumption was that they would get better rental deals than if they had only rented over a single floor. Therefore, the rates have been based on different values, yet after 60 years of this type of evaluation, the new rules will now reflect the expected rent for the floor if the tenant only occupied one floor in the building.  This will apply to all multiple tenanted building where the tenant has to enter the common area to get to another floor.

Eugene O’Sullivan a Chartered Commercial Surveyor and Managing Director at Morgan Pryce said: “It is predicted areas such as Clerkenwell and Shoreditch will experience the highest increase in rates, as the rents in these areas have increased hugely in the last seven years.”

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