The business rates battle: how to unlock savings

Not a month seems to have gone by in the last however many years without a headline slamming business rates in the papers. This criticism, while harsh, is not without due reason, as reform has long been needed on the agenda. Many feel that rates simply do not reflect current property trends and values, and are excessive – especially to local authorities, who find themselves under increasing financial pressure.

Despite many promises from many iterations of government for both reform and abolition, none has ever translated into action. Instead, incremental changes have been made, none of which provides the proper relief or change required to relieve the pressure that has been created. Business owners from a wide range of sectors and industries have had to get used to making do with what they have.

And while spokespeople in certain sectors have been successful in dominating the airwaves and forcing the government into making changes that benefit them, this has come at the expense of others. With the total collected remaining fixed (although rising with inflation) any relief for one means a bigger bill for someone else. This has led to some sectors, including local authorities, picking up the bill and left unable to voice their concerns on the issues facing them.

It is not all doom and gloom, though, as cost savings can be made – and in places that are commonly overlooked. In particular, time-poor authorities and councils, who are arguably those who need to make back money the most, can use these to their advantage.

A bit of background

Despite being a burden, business rates are an extremely effective means of collection for the government, bringing in around £25 to £27 billion every year. It is no wonder, then, that they remain a bastion of the government’s collection strategy. And the collection rate itself sits at 97%, so it’s reliable, too. Put it this way: if business rates were done away with, who would be willing to put up the cash needed to fill the gap they would leave?

Business ratepayers and their representatives have consistently been campaigning for more frequent revaluations, appropriate balancing between property types, and a lower rate in the pound. General rule of thumb is that if business rates are going to continue to be a mainstay, then they must be reformed. In the meantime, local authorities need to be able to make the current system work as best they can. Small changes in management and approach can make big differences.

The right to appeal: do you have it?

This April’s changes to multipliers benefitted precepting authorities that were ineligible for the retail, hospitality and leisure relief, as they now qualify for the lower multipliers set for eligible properties. Beyond this positive change, though, it is important to be aware that there are options to challenge your rates by appealing them.

Though appealing rating assessments is discouraged in Scotland, given there is an extant risk that you could lose an equivalent amount of grant to the rate saving, the same rule and standing does not apply in England. Public sector occupiers in England are fully entitled to review their rate liabilities, but many have yet to make use of this right. It is worth noting, though, that in doing so precepting authorities could lose some of the saving to rate retention - but pursuing the appeal could also generate a return in capital that is sorely needed.

With budgets under more and more strain, every penny spent needs to not only be accounted for but investigated. Steps must also be taken to ensure that every penny that could be saved, is saved. For those in the public sector hoping to reduce their rates liability, there are a few crucial steps to the process – and it is worth noting that these tend to mirror the process followed in the private sector.

Check that rates are only being paid on properties you are liable for; Ensure that any applicable reliefs, including empty reliefs, are applied for; Check the rateable value is correct and appeal this where necessary; Consider any mitigation for empty properties (though controversial, a number of public sector bodies do it, though it is critical to ensure schemes are legally sound).

Check the demands on your rates

Public sector bodies must keep their property terriers up to date, and check the rate demands for which they are liable. It is of fundamental importance to know what building, or part of a building, the demand is actually for, and it is equally important to be clear on whether the property is occupied and, if so, by whom.

So, what are your reliefs?

Authorities might want to set a checklist to ensure they are all clear on their reliefs. For example, when a charity occupies a property but the authority has agreed to pay the rates, it could be beneficial to put the rate demand in the charity’s name, as it could be eligible for charity relief and savings on the overall rates bill. Can you identify any other properties in the portfolio that the occupier could benefit from relief on? Sometimes small business rates relief applies, and sometimes even rural rates relief does, so it is good to be aware of this possibility. It remains vital that when checking all these facts, you ensure the authority and the tenant alike are paying the correct reliefs. And, for landlords, where tenants do have reduced outgoings, they can likely then afford to pay more rent.

Up to speed on rateable values

The rateable value for the 2026 Rating List is intended to represent the annual rental value as of 1^st April 2024. Another checklist comes into play here that could help authorities make a saving. Is the VO aware of all the rents at stake? Has it made an accurate assessment? Does the VO know if the property has been split at some point in the past?

Although it has historically been fairly easy to appeal a property’s rateable value, this process has become more sophisticated because of the complexities of the current system. Many rating agents will work on the basis of the savings they generate, so it becomes a non-cost exercise.

And what about empty properties?

Checking, challenging and appealing rates on empty properties can be a thornier issue. It should be relatively clear that where a property is vacant, the vacant relief should be obtained. Things change when there is any work being undertaken on the property, even if vacant, as there then the owner should consider whether it should be deleted from the list entirely. If the property is empty and looks like it will be for a while, there could be an opportunity for the local authority to mitigate rates while also recovering capital. Councils have been known to go out to tender to seek rate mitigation suppliers, with one government agency having successfully argued their property was vacant at Court. This ultimately resulted in guidance being issued by the judge on when a property was considered to be occupied, which can be used to assist and inform wider mitigation cases going forward.

There are several ways in which local authorities can be savvier with their property portfolios and identify cost savings. It might take some time and attention, but the savings gained could be hugely helpful to more important causes. What is more, a more assiduous approach to business rates from local authorities will also be to the benefit of their council tax and ratepayers. This will, in turn, ensure that capital is being dispensed more effectively at the same time as liability is being minimised. Essentially, it can be a win-win, if done right.  

For more information on business rates, or any advice and support on related issues, please contact Hartnell Taylor Cook via its London office on 020 7491 7323, or visit www.htc.uk.com.

Founded in 1922, Hartnell Taylor Cook LLP is a leading independent commercial property consultancy, managing over £2.5bn of property across the UK. Working on behalf of a diverse and extensive client base that includes government agencies, local authorities, blue light organisations, NHS, occupiers, investors, high net worth individuals, family offices and developers, the firm advises a breadth of national clients including Marks and Spencer Plc, Tesco, ATS Euromaster and The Maritime and Coastguard Agency.