Most logistics businesses, occupying large distribution warehouses, face increases in their rates bills following the 2005 Revaluation. Some properties will have substantial year-on-year increases for at least the next three years.
In overall terms the total rateable value for commercial properties in England, Wales and Scotland has gone up as a result of the Revaluation, and this has allowed for a reduction in the rate poundages in all three countries. For example the Welsh rate poundage was 45.2p for 2004/05 and this has reduced to 42.1p for 2005/06, a reduction of 6.9%.
Before the 2005 Revaluation, figures issued by the Government on the likely impact of the Revaluation on warehousing suggested that increases in rate liability would be limited and that liabilities would fall in many areas. Having looked at the 2005 assessments for large distribution warehouses in England, Wales and Scotland we can see this is not the case for these properties. In fact this sector is a big 2005 Revaluation loser.
In order to benefit from the Revaluation and get a lower rate liability, any increase in the rating assessment from the 2000 List figure to the 2005 List figure has to be less than the fall in rate poundage. So for England, any assessment that has gone up by more than 8% (1) is a loser as is a large property assessment increasing by over 7.3% (2) in Wales and 4.8% (3) in Scotland. Having analysed changes in the Rateable Values from the 2000 to 2005 Rating Lists for distribution warehouses in the UK, we have found that many such properties face very substantial rate liability increases even allowing for the fall in rate poundage. The table shows the next impact of the 2005 Revaluation based on average rate liability shifts in various UK locations for large distribution warehouses.
Transitional arrangements are designed to phase in the sort of large increases over a number of years. This also applies to decreases in rates bills. Different percentages apply to large and small properties in England. The Welsh Assembly has decided that there will be no transitional arrangements.
The small business rates relief scheme is unlikely to apply to many, if any, logistics businesses. Instead, larger businesses and those with multiple properties will pay a surcharge designed to pay for the relief received by small businesses.
In England and Scotland any rate liability increase for 2005/06 will be limited to a maximum of 16%. Increases thereafter will be phased in with the threshold limits increasing year-on-year. For locations with liability increases over 16% the increases will take a few years to take full effect. There are no transitional arrangements for Wales and the full increase in liability will be payable in 2005/06.
The Table reveals some interesting relationships – for example, in the southern M1 corridor, liabilities in Milton Keynes show substantial hikes whilst Daventry, Northampton, Luton fig 5LocationLiability 04/05 to 05/06LocationLiability 04/05 to 05/06and Dunstable show relatively small increases. Increases in the M25 corridor around London are pretty consistent at around 15% to 20%.
While some of the changes can be attributed to the relative strengths of the rental markets at the effective date for the Revaluation – April 1, 2003 – others probably have more to do with the Valuation Office Agency (VOA) catching up with the market in 2005 having under assessed certain locations in 2000. Southampton, for instance, shows the highest liability increase (63%) of any location for 2005 Revaluation.
Scotland shows increases ranging from 12.5% to 18% with Aberdeen seeing the highest increase. In Wales, the Cardiff area is showing average liability growth of 17% that will be fully effective in the first year.
Changes in liability in any particular locality can show significant variations based on size and age. Our figures are the average change of liability for the sample properties. In Warrington, for example, liability changes range from 42.5% down to -4.5% although these are extremes and may reflect physical alterations to the property.
John Upton-Prowse is a partner at Gerald Eve.