March 1st, 2017 / Insight posted in Articles

Business Rates – How will the April 2017 changes impact on you?

Business rates are changing on 1 April 2017. The new rates will be based on the rental value of properties on 1 April 2015 (rather than the previous 1 April 2008).

Whilst the revaluation exercise is not intended to raise revenue for the Exchequer it is no surprise that London-based businesses are facing sharp rises. Estimates published have reported that London rate payers will face, on average, an increase in rates of 11% and that some high-end city centre retailers will face an increase of up to 80%. Conversely, regions such as the North East, Yorkshire & Humber and the North West will benefit from a decrease of approximately 10%.

This disparity may cause some businesses to seriously evaluate the location of some, or all, of their businesses.

Transitional relief will be available which will provide a year on year cap on changes to rates. This relief should be automatically calculated by each council. Businesses should, however, check these calculations carefully to ensure they are getting all the relief they are entitled to.

Whilst landlords are unlikely to be paying the rates, the total cost of occupancy of an individual building subject to an increase in rates will clearly increase which, in areas where demand is slowing, may result in yields being squeezed.

It remains to be seen whether this increase in business rates will affect the decisions of potential buyers of commercial property in the South East. The market is already showing signs of a slowdown and some commentators have been referring to current commercial property investment in London, as a long-term “yield play”.

If you would like to discuss this further, please contact your partner at Kingston Smith or a member of the Property team.