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Deloitte comments on unexpected Government revaluation announcement

18 October 2012

Today, the Parliamentary Under Secretary of State for Communities and Local Government (Brandon Lewis) announced that it was the Government’s intention to postpone the 2015 Rating Revaluation in England until 2017.  No announcement has yet been made regarding the Revaluations which are also planned for 2015 in Scotland, Wales and Northern Ireland although  the devolved governments may well decide to follow suit to maintain uniformity.  The last Revaluation of non-domestic property in Northern Ireland was in 2003 and their 2010 revaluation was first postponed for a year and then cancelled.

Present indications are that the overall effect of the Revaluation had it gone ahead in 2015 was that the overall base of the Rateable Values would have fallen and as the revenue raised needs to remain at a constant level in real terms, then the multiplier would have had to increase by a factor greater than RPI.

The Government has said that this is good for local businesses, especially local shops. This is true.  However it will be bad for many High Street shops and many industrial properties which should have expected their rates to fall because their Rateable Values were expected to fall by more than the average reduction due to the significant decrease in their rental values since 2008.

Another winner of this announcement will be a large number of Central London offices. Current net rental levels of offices in Central London are now either at the same level as the Valuation Office Agency adopted for the current Rating List or are slightly ahead. This would therefore have meant that they would have paid more had the 2015 Revaluation gone ahead.

Robert Murdoch, head of rating at Deloitte, said:  “This announcement  is completely unexpected.  Following the debacle caused by postponing the next revaluation following 1973 for 17 years, the regular revaluations every five years, have been a feature of the modern business rates system since 1990 and have proved to have in the main worked efficiently.

“Many businesses will not welcome the postponement of the 2015 Revaluation as it had promised to bring some measure of relief in respect of current rate payments as Rateable Values are in many instances significantly higher than current rents.  

“The decision appears to have been taken to preserve current rates revenues and does nothing to address the main issue which is the current unaffordability of business rates.

“Instead of postponing the Revaluation to 2017, the Government should take action to address the unaffordability of this penal tax which generates about 5% of the total UK tax revenues annually. The first action should be to not implement any increase in the current multiplier which is likely to rise to 47 pence next year and even consider reducing it. The UK has amongst the highest levels of local property tax in the European Union. They should also consider removing the RPI linkage used to determine the multiplier each year. This link means that every year, the Government continues to take more tax by way of business rates without having any regard to the ability to pay. By way of contrast, those parts of the Republic of Ireland that have recently been revalued only pay a multiplier in the order of €0.18 for every €1 of Rateable Value.”

James Thompson, rating director at Deloitte, added: “Whilst at first sight this appears to be welcome news for beleaguered businesses it actually represents a stealth tax on the hard pressed retail and manufacturing sectors who would have expected their share of the total rates burden to have fallen as a result of the revaluation but who now will have to wait two more years before seeing any relief.”

Ends

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In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

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The information contained in this press release is correct at the time of going to press.

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