Navigating commercial property valuation in England and Wales

A rise in property values brings a rise in business rates

The commercial real estate sector has recently experienced significant shifts in valuation, and in turn business rate assessments, but not all sectors are created equal when it comes to these changes. One statistic that stands out is the 35% increase in values for industrial spaces and logistics facilities.

With the rise of large businesses and start-ups like Amazon focusing on logistics, the demand for industrial spaces has skyrocketed, which has pushed rental values and tax assessments higher. But how are commercial property business rates calculated? And can firms challenge their bill if they think they’re being overcharged? The short answer is yes, but there are many considerations to take into account.

Rates calculations

The rate calculation is designed to be as fair and consistent as possible, accounting for a range of variables.

Measurement

The first step in assessing a property for tax purposes involves an inspection and measurement of the property. A surveyor from the central government's Valuation Office Agency (VOA) would usually conduct this process. In the industrial sector, the property is typically measured based on its Gross Internal Area (GIA) — the usable space within the property.

Rent and valuation dates

The next step involves calculating the property’s value based on the rent it commands. This rate is calculated based on its "valuation date" — 1 April 2021 for the current rating cycle — which the VOA uses as a snapshot in time to gather and analyse data and ensure consistent and fair evaluations across various properties.

Essentially, the rent of the property is divided by its significant floor space, resulting in a rate per square meter. This simple formula forms the foundation for the tax assessment of most industrial properties.

Business rates multipliers

After that, the rent-derived value is modified by a Uniform Business Rate (UBR) multiplier dictated by the central government. This multiplier ultimately determines the amount a firm actually pays in terms of rates.

Reliefs and incentives

There are also various reliefs and incentives that might be available depending on the location and type of business. Some areas have enterprise zones where businesses may receive additional relief if they meet certain criteria (like employing people from within the local area). These reliefs and incentives can differ from one authority to another, adding another layer of complexity to the assessment process.

Are firms being charged a fair rate?

Upon receiving a business rate tax assessment, it's crucial for a firm to review its details to ensure they're being fairly charged. There are resources available to evaluate firms’ assessments and a process to challenge unwarranted rates, but where should they begin? A good first step is to visit the VOA website, where one can cross-reference the publicly available breakdown of their property's valuation. Firms should pay particular attention to the square meterage listed for different property components like warehouses, offices, and parking spaces to ensure they match their records.

The next step is to examine the annual rates bill, which serves as an official communication from the local billing authority. This bill should specify any revisions in the rates and the date of liability.

Note that a firm should not be charged for any days they were not beneficially occupying the property, such as during construction or fit-out periods. If the property is partially used, such as if a firm occupies the warehouse but not the offices, they should consider seeking relief for that unused portion by removing it from the assessment.

The Check, Challenge, Appeal (CCA) process

If a firm’s research indicates that they’re being charged more than they should be, they have recourse. Introduced in 2017, the Check, Challenge and Appeal (CCA) process offers a standardised method for businesses to question their tax bill. There are three steps to this process:

Check

The first step is a factual review of the property, often conducted by professional surveyors, to confirm that its physical characteristics match the valuation. This report is then submitted to the VOA. Although the agency aims to respond within three months, high case volumes can create longer wait times — sometimes up to twelve months.

Challenge

Firms can move to the Challenge phase once the facts have been determined. This phase focuses on the property’s specific valuation. Here, firms are required to present evidence, such as comparable rental evidence, to argue for a revised valuation. The VOA aims to resolve challenges within 12 months, but if firms that haven't received a response within 18 months, they can proceed to the Appeal stage.

Appeal

If the Challenge stage fails to yield a satisfactory outcome, firms can opt to take their case to an independent valuation tribunal. This panel reviews all evidence and arguments to decide the fair value of the property.

During this process (which can take 18 months or longer), firms are required to continue paying the existing rates. However, successful challenges receive a refund, backdated usually to the start of the original liability date, as long as it is within the current rating list. Once a new rateable value is established, it remains in effect for the remainder of the current three-year rating cycle, thereby impacting future tax bills.

Navigating the CCA process requires careful attention to detail and timing. A missed deadline during any stage could result in significant delays. There is also only one opportunity to challenge the valuation, so companies need to ensure their case is comprehensive and well documented.

The long-term benefits of proactively managing tax assessments

Proactively managing business rate assessments provides long-term benefits for companies, especially landlords, beyond just immediate cost savings. Effective management enhances a property's "desirability factor", making it more appealing to potential tenants or buyers.

This approach not only makes the property more viable for current owners but also expands the pool of potential tenants, a critical consideration as compliance requirements tighten in 2026. Additionally, properties with lower tax rates are more likely to be fully leased, resulting in higher yield returns and increased resale value for landlords, who can then command higher selling prices compared to those with vacant, high-tax properties.