Business rates and the potential impact of the new rateable values
Mark Radford FIRRV, of Mark Radford Rating, a ratings expert that regularly advises RYA Affiliates on ratings issues, discusses the impact of the new rateable values
On 01 April 2023 new rateable values will take effect for all non-domestic properties in England, Wales and Scotland
The new assessments are intended to reflect the annual rental value of properties in April 2021 (April 2022 in Scotland) and they will form the basis of rate liability for the next three years.
Although the individual rating systems and the calculation of bills in England, Wales and Scotland vary slightly, from April 2023 there are some common changes taking place:
- While multipliers in England and Scotland will remain fixed at 2022/2023 levels – there will be a slight rise to 53.5 pence in Wales.
- Lower bills resulting from reduced rateable values will immediately take effect.
- Increased bills will be phased in gradually.
- Small business relief provisions will be retained
- Retail leisure and hospitality rate relief will be increased from 50% to 75%.
There is some concern within the sport and recreation sector that the assessments of many sports clubs appear to have been increased despite increasing costs, limits on income and the potential decline in membership as a result of the cost of living.
Fortunately in 2023/2024 the effects of many increased assessments will be masked by the increase in rate relief from 50-75%
The increase in retail, leisure and hospitality relief will help hard pressed clubs and it is to be welcomed. However, the present relief scheme is a temporary measure and there is no certainty about the level of provision, or even the continuation of relief, after 2023/2024.
There is widespread agreement that the current rating system is not fit for purpose. The need to discount rate bills for the recreation sector by 75% to achieve realistic levels of liability merely highlights the absurdity of the tax in its present form. Despite this, the Government appears to be committed to the continuation of the present business rate system for the foreseeable future.
If any proposed rateable value seems excessive or poses a threat to the financial stability of a club, action can, and should be taken.
Clubs that are unhappy with their new rateable value can challenge it at any time between April 2023 and March 2026
For guidance, a rateable value may generally be considered too high if:
1. It is financially onerous and/or;
2. It exceeds any surplus made on ordinary sporting activities during the year and/or;
3. It exceeds 20-25% of annual turnover.
The Government’s proposals to limit rate bills for sports clubs in 2023/2024 will reduce the immediate burden of rates for most, but there remains the fear that this may be a temporary provision and the full weight of rate liability could return in future years. The business rate system will continue in its present form until at least 2026; we can only hope that within the next three years the Government recognises the problems caused to sports clubs by business rates in their current format and that realistic improvements or alternatives are introduced as soon as possible.
If you are a member of an RYA affiliate and require further advice relating to business rates, you can contact Mark Radford markradfordrating@gmail.com.