Business rates increases potentially crippling

Following our legislation update in March, business rates were reviewed at the beginning of April taking as a basis the trading potential of property and rental values as of 1 April 2008. Several analysts have warned that this will prove very damaging to the hospitality sector – already weakened by last year’s economic crisis – because the rates will be based on values at the height of the property boom.

According to GVA Grimley, a property consultancy, business rates for three-star hotels and above in London are likely to increase by 40% to 60%, with luxury hotels the worst hit and some increases going as high as 100%.

Rates increases are not final, however, and they can be challenged according to Dan Mackernan, a senior surveryor at Davis Coffer Lyons, who advises to “review the valuation in terms of trading assumptions or floor areas” and contest it with the Valuation Office by “lodging an appeal with a reputable agent”.

Another step that can be taken, according to Mackernan, is to apply for relief schemes such as hardship relief and discretionary relief from local authorities or the Business Rates Deferral Scheme.

It should be noted that the threshold for small business rate relief and rural rate relief have been raised. Businesses in Greater London are eligible for the small business rate relief if they only occupy one property with a rateable value below £25,000 (for properties outside Greater London, the rateable value needs to be below £18,000).

Some relief will be provided by the Government from October when business rates are set to be reduced for a period of one year (see our Business Rates section for more information).