Logistics operators have been hit hard by the current economic downturn having already had rising fuel costs and empty rates liabilities to deal with, and Atisreal believes that the wholesale review of port assessments that the Valuation Office Agency is currently undertaking will further increase the financial pressure they are under.
Historically, a statutory formula has been used to calculate the rateable value of port premises, however this changed for the 2005 rating revaluation which saw a return to conventional methods of valuation. The VOA has recently reviewed the assessments of 13 ports across England and Wales and the impact on both port operators and occupiers has been considerable. At the Port of Hull the net result of the exercise has been an increase in total rateable value comprised in the port from £9.25m to £14.7m backdated to 1st April 2005. This means an increase in the rates yield from the Port of Hull for the current 2008/2009 rate year of around £2.5m, but more critically an additional backdated liability for the 2005/2006 to 2007/2008 rate years totalling over £7m to be met by port occupiers, many of which are logistics companies.
The reviews and potential increased overall level of assessment and therefore liability are a result of the VOA ensuring that what is included in the port assessment is correct. In the past there has been a fairly relaxed attitude, owing to the formula-based approach to assessment, to the identification of the extent of property included in the port assessment. This may have included properties not occupied by the port operator and hence which should have been subject to separate assessment, with rates liability falling on the occupier.
Under the current review the VOA, led by their utilities rating team, are systematically reviewing the assessments of major ports following site inspection and the review of leases or other agreements held by portside operators and taking action to apply a separate rating assessment in relation to land and buildings not occupied by the port operator. The VOA are exercising retrospective powers and the reviewed assessments are being backdated to 1st April 2005, the start of the 2005 rating list. With regard to the Port of Hull, the VOA’s assessment saw 16 existing assessments merged and then divided in to 54 separate assessments, the majority of which are effectively new.
Steven Turton, director of rating at Atisreal said: “We are advising clients currently occupying a variety of properties based at ports throughout the UK in respect of the VOA’s review which could lead to unexpected and substantial additional occupational costs which many occupiers have only recently been made aware of. The legality of the revised rating assessments being applied retrospectively is the subject of legal advice with a potential challenge to follow in relation to Hull, where the local MP also is taking an interest.
“The VOA are well advanced in their research to review a further 40 or so statutory ports; they have however postponed actioning reviews in light of the potential legal challenge to retrospection,” Turton said.
“There is no question that this further business rates misery will add to the woes of logistics operators. All occupiers of properties within a statutory port should be prepared for this reassessment if it has not already taken place and seek professional advice.”