The 2023 business rates: Getting to grips with new rateable values and relief options

The seismic shock of the 2023 business rates revaluation in England and Wales is reverberating through the commercial property market. The combined effects of Brexit, the aftermath of the COVID-19 pandemic, and the collapse in demand for new leases, within the context of rising standard of living and business costs, have made the revaluation the most subjective yet, heralding a major sector-wide impact.

On top of that, the latest Compiled Rating List published by the Valuation Office Agency (VOA) seems to be full of inconsistencies, leading to higher levels of increases or lower levels of reductions than expected. For that reason, it’s essential to question whether a challenge against the new assessment is needed.

Revised rateable values by sector

The 2023 revaluation saw a 7.1% increase in the total rateable value (RV) on the local lists for England and Wales. The retail sector, as defined by the VOA, was the biggest winner, with a 10% reduction in rateable value, with offices seeing a 10.2% increase, and industrial properties with a 27.1% increase. The “Other” sector – including hospitality, leisure, education, transport, and health – has seen a 4.2% increase.

Figure 1 – Change in rateable value under 2023 revaluation

Business rates are among the largest and most difficult expenses for companies to accommodate. Occasionally, the VOA sets rateable values too high, forcing businesses to absorb outsized costs that can hinder their continued operation.

Fortunately, the VOA offers a “Check Challenge Appeal” option, allowing ratepayers to review their rates and contest them if they believe them to be too high, or if they have made significant changes to their property that may affect its value. Successful challenges could entitle businesses to a rebate for overpayment, based on rates from 1 April 2021.

The process for challenging your rateable value involves three stages: Check, Challenge, and Appeal.

• The Check stage involves reviewing your rateable value and ensuring that it’s accurate according to factors such as the size and location of your place of business

• The Challenge stage involves submitting an appeal to the VOA if you believe that your rateable value is incorrect

• If you disagree with the VOA’s decision on your rateable values, you can then proceed to the Appeal stage to argue your case before the Valuation Tribunal

Forms of relief

There are several types of relief available to businesses that occupy commercial properties or struggle to satisfy their business rate obligations:

• Small Business Rate Relief is available to businesses that occupy properties with a rateable value of less than £15,000. Eligible businesses can receive up to 100% relief on their business rates

• Charitable Rate Relief is available to charities and non-profit organisations that occupy properties for charitable purposes. Eligible organisations can receive up to 80% relief on their business rates

• Enterprise Zone Relief is available to businesses that occupy properties in designated enterprise zones. Eligible businesses can receive up to 100% relief on their business rates for up to five years

• Local Newspaper Relief is available for properties used as office premises for journalists employed by local newspapers. To qualify, publications must be printed and cannot be magazines. A £1,500 reduction in business rates per year can be awarded to one eligible publication per property, but this relief will end on 31st March 2025

• Supporting Small Business Relief is available to small businesses whose rates increased due to the 1 April 2023 revaluation, or which have lost some or all of their small business rate relief or rural rate relief. Eligible small businesses’ bills will increase by no more than £600 for the 2023/24 tax year

• Transitional Relief is available to businesses whose rates go up by certain amounts. Rates increases are capped at 5% for businesses with RVs of up to £20,000 (£28,000 in London); 15% for those with RVs of £20,001 (£28,001 in London) to £100,000; and 30% for businesses with RVs over £100,000 for the 2023/24 financial year

• Hardship Relief is available to businesses judged to be at risk of financial difficulties without relief, or those whose continued operation is thought to be a benefit to local people

• Freeports Relief is available to businesses based in any of the UK’s eight freeports, and will last for a period of five years

• Heat Networks Relief is available for properties primarily used to generate or supply heating or cooling to other properties. Eligible facilities must derive energy from a low-carbon source and supply heating and cooling to homes, public buildings, or similar properties. 100% relief is available for eligible low-carbon heat networks with their own business rates assessment. In order to qualify, the network must be used entirely or primarily for heating using low-carbon sources. For the 2022/23 financial year, this relief was delivered using existing local government discretionary relief powers funded by the Government. This approach will be continued in 2023/24, until the passage in Parliament of the legislation making these reliefs mandatory

• Empty Property Relief is available for all unoccupied properties for three months (along with an additional three-month exemption for empty industrial properties such as warehouses). Listed buildings until they are reoccupied are exempt, as are those buildings with a rateable value under £2,900. Charity-owned properties or community amateur sports club buildings can get extended empty property relief if their next use will be mostly for charitable or sports club activities, respectively

• Retail, hospitality, and leisure relief is available for eligible businesses such as restaurants, cafés, bars, pubs, shops, cinema and music venues, or hospitality and leisure services. Ratepayers can get a 75% reduction in their rates bills for the period from 1 April 2023 to 31 March 2024, with a maximum benefit of £110,000

• Improvement relief is available for ratepayers interested in investing in improvements to their property. Under this option, ratepayers won’t have to pay higher business rates for 12 months after implementing qualifying improvements. Improvement relief will come into effect from 1 April 2024 and will remain available until 31 March 2028

• Generation and storage exemptions are available to ratepayers who install equipment, such as rooftop solar panels, wind turbines, battery storage, and electric vehicle storage points, for the generation and storage of on-site energy. This change in rates regulations came into effect on 1 April 2022 and will be available until 31 March 2035

Qualifying plants and machinery are those used for the generation, storage, transformation, or transmission of power in which the energy sources or technologies relied upon are mainly or exclusively one of the following:

• Biomass

• Biofuels

• Biogas fuel cells

• Photovoltaics

• Hydropower (including waves and tides)

• Wind

• Solar power

• Geothermal heat from the air, water, or ground

Check, challenge, and appeal

As part of Altus Group, a leading provider of asset and fund intelligence for commercial real estate, Altus UK Tax leverages deep industry expertise, analytics and technology to help clients Check, Challenge and Appeal their new rateable value to ensure they pay the correct amount in business rates. We undertake more business rate appeals in the UK than any other company.