By Sarah Davey, Head of Ruddle Merz London

As the economy struggles to recover, most smaller enterprises (SMEs) could be forgiven for taking pride in the fact that, despite the odds, they’ve managed to ride the financial wave so far. However, there’s another threat on the horizon that may well swamp those businesses already struggling to stay afloat.

In April 2012, business rates, which are linked to the Retail Price Index (RPI), will be reviewed and the Uniform Business Rate (UBR) — the multiplier against which business rates are calculated - will rise.

Far from being a small shift, it is likely to be the biggest annual jump in rates for more than 20 years with the UBR increasing from 43.3p to 45.7p in the pound.

For businesses in The City of London - which use a different multiplier - the news is even worse as rates are predicted to rise to 46.1 pence in the pound.
Businesses in London with premises with a rateable value greater than £55,000 will also have to pay a Crossrail supplement of an additional two pence per pound of the value (two per cent).

So as storm-battered businesses face another deluge, it is important to batten down the hatches wherever they can.

Although loosely based on a premise’s annual rental value, business rates are dependent on a number of factors ranging from size, usage, industry, location, even down to what type of heating it has.

With so many factors to take into consideration, calculating a property’s rateable value is complex, and unfortunately mistakes are often made which can result in businesses being overcharged.

So how do you know if your rates bill is correct? There are some basic checks you can do — such as whether the Valuation Office Agency (VOA) has recorded the floor space of your property correctly — but these alone will not confirm whether your overall bill is accurate or not.

If a neighbouring office, warehouse or shop floor has the same layout as yours, you can check that their rateable value is the same as yours. However, this too can be fraught with problems as neighbouring properties tend to be grouped together in a valuation scheme for consistency, so the fact that both your rateable values are the same is no guarantee — they could both be wrong.

On the flip side, it is also possible that if you ask the VOA to check your rateable value, their investigations may find that you are being undercharged, and increase your rateable value accordingly.

One of the most reliable ways to check whether your business rates bills are accurate is to appoint a rating agency. Many rating agencies earn their fees by charging their client a percentage of the money they have saved them.

The smaller the business premises, the less money they are likely to earn so businesses with a rateable value of less than £50,000 may struggle to find an agent to take them on.

For those with premises with a higher rateable value, most rating agents will welcome you with open arms. But like any other profession, there are good ones and bad ones, so how do you avoid the cowboys?

The VOA has published guidance on choosing a rating agency which covers subjects like professional qualifications and making sure that your agent is a member of the RICS (Royal Institution of Chartered Surveyors), IRRV (Institute Of Revenues, Rating And Valuation) or the RSA (Rating Surveyors Association).

It also suggests that you ask for examples of their previous work for premises similar to your own and speak to previous clients, as this will give you an idea of the sort of savings and level of client satisfaction they have managed to achieve.

Many rating agents operate on a no-win, no-fee basis, though not all do, so it is important to check their pricing structure carefully. Some agents that work this way will want to be paid before securing a reduction in your business. If you can, look for an agency which will only invoice you after securing you a saving.

As you would expect, the VOA also suggests that you read the fine print on any contracts carefully. Most rating agents insist on five-year contracts and annual billing throughout the five years, once you have achieved a saving, though some will want to be paid up-front.

Further to the VOA’s advice, and while you may not envisage this at first, it is sensible to look for an agency that you would feel happy to work with in the long term as they can often provide valuable advice on short term business rates issues too. New road layouts, a prolonged period of building works, or even direct competition moving into the area can entitle a business to a reduction on their business rates as a material change of circumstance.

If you get as far as identifying an agent and working with them to the point that they submit an appeal for you, prepare yourself for a long wait. There is currently a backlog of thousands of appeals, with only businesses facing genuine hardship able to ‘jump the queue’.

The Government’s austerity measures are seeing both the VOA and local councils cut back on staff so the backlog is growing, and the best rating agent in the world can’t speed up this process.

But should you need to, the sooner you join the appeal queue, the quicker your rateable value can be adjusted, leaving you able to move forward with bills that accurately reflect what your business premises is worth.

And of course, that means that when the storm does hit with higher rates bills next Spring, you will at least be closer to securing the discount that is right for you and your business.

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