Only Fools and Horses: The disastrous consequences of the business rates revaluation

A horse walks into a bar. The barman asks “Why the long face?” The horse replies, “because the forthcoming changes to commercial property tax looks set to cripple both the British equine industry, and rural businesses with an extortionate increase in bills”.

The barman faints from shock, not due to the talking horse, but because the 2017 business rates revaluation could have severe consequences for the nation’s pubs as well. In fact, many small to medium sized businesses in a wide range of industries look set to be unfairly impacted by the forthcoming changes, which look to be so ill-thought out and potentially harmful that the Countryside Alliance has called for the government to “go back to the drawing board”.

Here’s how the 2017 business rates revaluation could affect your business, and what business should be doing to counter these measures.

So why has this year’s business rates revaluation caused so much controversy?

Originally, the government announced that the number of properties eligible for rates relief would be increased. Since 2010, properties with a rateable value of up to £6,000 have qualified for exemption; this was set to increase to £12,000 in 2017. For many businesses —including those in the equine industry—this was welcome news.

Unfortunately, what the new valuations of properties actually means for pubs, rural businesses, and SME’s across the UK is a sharp increase in their bills. Not the rates relief they originally thought they were due.

The general consensus from the Countryside Alliance is that the valuation system is flawed, as it calculates the rateable value of a property based on it’s size. Rural businesses, such as riding schools and livery yards demand a lot more space than most offices for the very simple reason that horses require more room than computers. This, unfortunately, seems to have eluded decision makers at The Valuation Office.

It is the concern of these rural business representatives that the revaluation has been created by pen pushers, who haven’t the faintest idea about rural businesses and the challenges they face. But, it seems like these so-called pen pushers haven’t given too much thought to businesses in London either. London based business rates experts, Gerald Eve, warn that the 2017 business rates revaluation could be result in a 42% rise in rates for some businesses, at a potential cost of £500 million for London’s ratepayers.

What businesses are affected by the revaluation?

Whilst the Department of Communities and Local Government said no small business will see an increase of more than 5% this year, that doesn’t tell the whole story, and is especially unhelpful to businesses that are already financially stretched.

One of the reasons horse-based businesses resent the revaluation is that their properties will be among the hardest hit outside of city centers. According to the British Horse Society, with more land than the average high-street shop, some riding schools in the Southeast are being hit with increases of 365%.

Publicans certainly aren’t mincing their words either They’ve described the revaluation as ‘potentially disastrous’. The brewing industry contributes £23 billion to the UK economy, but the revaluation could be ruinous to hundreds of pubs and bars – an industry which is struggling as it is. In early 2016 the number of pubs fell to its lowest level for a decade, with 27 closures a week. Those that remain may be forced to hike up their prices to stay afloat, the price of the average pint is set to increase by 5p following the revaluation.

Beyond paddocks and pubs, SME’s in a wide array of industries have reacted with anger and confusion to the news. In London, entrepreneurs, small businesses and startups could be hardest hit. The Guardian reported that many London-based SME’s are facing steep rises, whilst businesses in the North are enjoying reductions. A report by estate agents, Colliers, claimed that certain businesses in particularly fashionable areas of central London could face rises of a staggering 415%.

What can businesses do going forward?

It seems that businesses in both rural and urban areas in the Southeast feel that they have been dealt a poor hand by the 2017 business rates revaluation. Neither group, it appears, are taking it lying down.

In response to the fallout with equestrian businesses, the VOA told Horse and Hounds magazine that their calculations for the sector are in fact accurate. Businesses can choose to challenge their rates from April 1st onwards. As for the British Horse Society, they’ve been campaigning hard for changes, writing to every MP in England and Wales.

Pubs are responding too, with many in the industry calling on the new chairman of the ‘Save The Pub Group’, Labour MP Toby Perkins, to make the issue a priority. Meanwhile, business in London are up in arms too. The East End Trades Guild, which represents a community of small businesses in the East End of London, delivered a letter to 10 Downing Street which warned excessively high rates could extinguish SME’s in the capital.

Businesses from all sectors are vital to maintaining a stable economy. These changes threaten to undermine that. If businesses are concerned that they are being unfairly treated by the revaluation, they can appeal. Since the former rates revaluation in 2010, billions of pounds have been saved by doing just that.