Firms to ‘overpay £221m in business rates’

More than 110,000 firms in England and Wales are likely to miss 31 March deadline for appeals over business rates, and at least £221 million in potential relief will lie unclaimed.

This is according to CBRE, the commercial property and real estate services advisor, which conducted research into the “scramble to claw back” overpaid business rates for the 2010-2015 period. It said there will be around £221 million in overpaid tax.

Since the latest tranche of business rates was announced in 2010, over 670,000 appeals have been lodged with the Valuations Office Agency, of which over a quarter (28%), have successfully led to a change in tax payable. Successful claimants can expect an average 11% reduction in their bill to local authorities, extending back retrospectively by up to five years, according to the CBRE.

Successful appeals typically need to provide evidence that the Valuation Office’s estimated rental value (ERV) for the property, calculated as at 1 April 2008, is incorrect. Other factors leading to a reduction in rateable value stem from a material change in circumstances at the property, such as disruptive road or building works, or a new shopping centre in the area, causing a reduction in footfall for existing retailers.

Over 936,000 appeals were lodged against the 2005 rating list, with close to one in five (17.8%) made in the six months leading up to the deadline. CBRE forecasts that the 670,000 appeals made against the 2010 rating list by the end of November 2014 will climb to over 820,000 in the coming fortnight.

If the total number of valid appeals lodged against the last list are a yard stick, it is estimated that 114,500 appeals will not file in time. Even this is a conservative estimate given the growth in the number of rateable properties in the UK. At the most recently reported appeal success rate1, that’s at least 32,000 missing out on a tax reduction.

George Osborne introduced a change3 to business rate appeals in the Autumn Statement 2014, limiting those lodged after 31 March 2015 deadline to rates paid from 1 April 2015, significantly shortening the period businesses have to claim back for overpaid tax.

Jonathan Kinsey, CBRE’s head of rating and taxation said: “We always expect to see a spike in appeals in the run up to the deadline, but unfortunately there are still thousands of companies who will miss out on what could be a significant reduction in their business rate bill.

“With so many SMEs still finding their feet following the financial crisis, a successful rate appeal could have a material impact on a company’s ability to survive if not succeed in today’s competitive marketplace.

“I would urge those that haven’t already looked at their rateable value to do so right away. The deadline on the 31 March is for appeal applications, not the completion of a Valuation Office alteration, so there is still time to review and protect your position.”