2017 Rates Revaluation and Advice on How to Appeal

The rateable value (RV) of a non-domestic property:

• Approximates to the rent payable on standard full repairing and insuring terms, in other words the notional rent that a third party would pay an owner to run the self-catering business.
• Is fixed according to the level of values that prevailed on 1 April 2015.
• Reflects the physical circumstances of the property as at 1 January 2017.

As actual rents are very uncommon in practice, the Assessors have to look for a method to calculate a notional rent.

The Assessors:

• Are independent chartered surveyors
• Are appointed by each valuation authority (the local council/councils)
• 14 Assessors provide valuation assessment services across all 32 local authorities.
• Share resources and expertise through the Scottish Assessors Association (SAA)

Each revaluation is, in a sense, a reset button and a fresh start. Each revaluation has a ‘tone date’, which is 2 years prior to the revaluation. 2017 tone date is 1 April 2015.

There are currently 226,000 properties in the Business Rates scheme, with a total RV of £6,773M total.

RVs will be released on 15^th March 2017 and will be effective from 1^st April 2017.

In brief, there are different ways to calculate the rateable value of self-catering properties. One is to look at existing rents paid. In 2010, this data amounted to only 5 or 6 properties. In 2017, excluding Edinburgh, there were only 26. There is not deemed to be enough data to base rateable value on this method, and given the high figures for actual rents paid, this method would certainly not favour the sector.

The Revenue Principle is considered the best, and fairest way to assess RVs for self-catering:

• Income less expenditure* gives a net profit for each individual business that returned a form. (*Allowable expenses include advertising, heating, lighting, commission, tv, laundry, professional fees, and sundries. Travel and repairs are standardised.)
• Minus 20% (the profit a tenant may expect to yield from the business ).
• The remaining 80% of profit, the Divisible Balance, is split 50/50% between rates and rent
• But the rate actually paid is roughly 50p in the pound.
• So 75% of the Divisible Balance is attributed to rent and 25% is attributed to rates, making 25% of the profit rates payment (this safeguards properties in case the small Bonus Business Scheme is removed).
• The 75% “hypothetical rent” is divided by the number of bed spaces, to provide the hypotheical RV per bed space.
• These figures were averaged according to classification and location to reach a national average.

The RVs that have been published are based on analysis of all the data received.

Property classifications (whether your property is a 1970s built chalet, or a new, purpose built house) and locations (principal city centre or average location, etc) have changed. Rates per guest place range from £275 for a 1970’s chalet in a less popular tourist area to £2,000+ for modern properties in principal city locations. These classifications and locations can be seen at www.saa.gov.uk in the 2017 Practice Note. It is worth noting that there is a separate Practice Note for Edinburgh City Centre, which behaves in a different way to the rest of Scotland.

Advice to Members who wish to appeal:

You are perfectly entitled to appeal against your new RV, if you think it is higher than expected.

Notices will go out on 15^th March.

Businesses have only six months to lodge an appeal from 1^st April to 30^th September.

You are perfectly entitled to appeal. It is the start of a conversation process and each case will be looked at individually.

• The vast majority of appeals are resolved through informal discussions.
• All appeals should be resolved by 31 December 2020.
• Decision can be appealed to Lands Valuation Appeal Court in Edinburgh.
• Complex appeals handled by the Lands Tribunal for Scotland.

Contact your local Assessor in the first instance as any query or dispute may be capable of resolution without making a formal appeal.

You can ask how your properties have been classified (refer to the 2017 Practice Note).

If you didn’t submit a revaluation Return of Information form in 2015, you will be asked to do so.

The basis of any appeal will be values at or around April 2015.

Appeal Process:

• Go to the Portal (https://www.saa.gov.uk).
• Submit a simple online form, which will be acknowledged by the Assessor.
• The last date to appeal is September 30^th
• Appeals will not be looked at until then.
• All appeals will be looked at together, regionally.
• All appeals will be addressed within three years (31^st December 2020).
• Appeals can be dealt with quicker by request from the Valuation Appeals Committee (VAC).
• The Assessor may agree that your circumstances are such that an amendment can be made and the RV will be reduced. Alternatively, they will state why they believe the RV is correct and it will be upheld.
• If you are not happy with this, it will go to the VAC.

There is scope to amend the RV:

• Assessors can make allowances for disadvantages (things that will significantly impact on the enjoyment of the property,).
• They now have more flexibility to assess allowances, having increased from +/- 10% to +/- 20%.
• If you have a swimming pool on site, this could be seen as an advantage, and so allowances could be increased up to 20%. This only applies to items that the Assessors know about – usually those items that require planning permission, so this would not include hot tubs etc unless planning permission had been required. It is worth considering that should the Assessor visit and find improvements that they are unaware of, RVs can go up.
• It could be argued that connectivity (mobile, broadband or infrastructure) is a disadvantage and could have a negative allowance attributed to it. If you believe this to be an issue, you can ask the Assessor to revalue the property. However, in the best locations, this would probably not result in a value alteration.
• It is unlikely that an appeal on the amount of increase of the RV alone will succeed as the Assessors have figures to back up their general rate of increase.

If there is a material change, which affects the enjoyment of the property (a factory is built opposite the property), you can appeal at any time.

If a new-build property is established next door and you find yourself with competition, that is a matter for the next revaluation.

All appeals will dealt with concurrently and a view will be taken on all of the appeal issues identified in each Assessor’s region. If the rate per guest place for a particular class and location is adjusted, any properties near by that also appeal may also be adjusted.

There is no requirement to go to the Valuation Appeal Committee . Through negotiation, it is quite possible to reach an agreement, or at least the Assessor can explain how the RV was reached.

There is no requirement to instruct a lawyer or chartered surveyor. The appeal process is simple. Beware of cold calling companies selling their services to amend the RV, especially those asking for payment up front. If a property falls just above a SBBS threshold, these owners may be targeted first.

If a case goes to Committee, they would also look at the area as a whole. If they find a flaw in the analysis, the appeal will be upheld.

The Valuation Appeal Committee (VAC) is made up of lay people (teachers, accountants, lawyers). There is no cost in taking a case to the Committee. The VACs are open to the public. It is a quasi-judicial hearing, but formal representation is not a requirement. The most important element to consider if you decide to go to Committee is to be fully prepared (and perhaps attend a VAC to know what to expect).

If you disagree with the Committee’s decision, the last port of call is the Land’sValuation Appeal Court. This will only happen if there is a point of law to consider, that is contentious..

The Lands Tribunal for Scotland is another recourse It only applies to extremely complex cases. You have to apply to the Committee to take it to this level, and the Assessor can object. Any Land’s Tribunal case (of which there are few) becomes a test case.

The whole rating system is subject to the Barclay Review, reporting this summer.

Small Business Bonus Scheme 2017-18:

Based on the total RV of all your business premises, the following reliefs are proposed:

• RV up to £15,000 – 100% relief (ie no rates payable)
• RV £15,001 to £18,000 – 25% relief

If you have more than one business property, with a combined RV of between £18,001 and £35,000, you will get 25% relief on each individual property with a RV of under £18,000.

The Scottish Government is entitled to withdraw this scheme at any time, and the results of the Barclay Review may impact on it. Even if your business is within the SBBS, should you feel that the RV increase is unreasonable, you should still consider appealing.

February 2017