New Business Rates Creates Opportunities For Investors (UK)

Business rates in the UK, are a changing.  The Rateable Value is the basis on which yet another tax on UK businesses business rates are calculated. According to the .gov.uk site,

From today (30 September 2016), anyone in England and Wales who pays business rates, can go online to check their new draft rateable value. From this they can get an estimate of what their business rates will be from April 2017…

We recently revalued all 1.96 million non-domestic properties in England and Wales. These new rateable values are based on the rental value of properties on 1 April 2015, and will be used to calculate business rate bills from 1 April 2017.

So your rates could be going up. Or down. Depending on whether property prices in your area have risen of fallen. According to the BBC, businesses in some areas will see an increase of an eye-watering 415%.  Areas, particularly in the north where property prices have dropped, could see reductions of up to 71%.

Investors in negotiations to buy a business would be well advised to use the new tool from the Valuation Office to assess the rates they will be liable for if they proceed with the acquisition.  In some cases, the economics of the deal may be severely impacted.

Conversely, of course, in areas where property prices have seen a fall, and vendors have price expectations based on their historical profit, there may be opportunities for an investor to benefit from the steep reductions.

BR is the largest expense for businesses after rent and wages, and a 50% (or higher) drop in the rates bill could make some previous unviable businesses attractive targets.  A sample business in Newport, South Wales, with a business rates bill of £60,000 pa. would save £42,600 a year from April 2017.

Apart from geographical winners and losers, there are sector based winners and losers too. Forecort owners, for example, are not particularly happy as they feel they’ve got a bum deal and that the new settlement is unfair to them.