2017 Rates Revaluation and 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.
- 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 15th March 2017 and will be effective from 1st 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.
For advice on how to appeal and the appeal process, please log into the Member’s area, or join the ASSC.