In this series of articles, CBRE Scotland answers questions on business rates – this week looks at the effect of falling rents.
Question: I recall hearing that rates bills are linked to rents. We occupy a number of buildings in Aberdeen and with the collapse in oil prices I know that rents are coming down also. Does this mean my rates bill will reduce?
Brian Rogan: Business rates are an annual tax levied on business properties on the basis of the rental value of the property at a statutory valuation date. The last revaluation of business properties for rates purposes happened on 1 April 2010, with the next revaluation set for 1 April 2017.
In Scotland, an occupier of a commercial property can only appeal against their business rates charges at the time of revaluation or when there has been a “material change of circumstances” affecting the property value.
The dramatic fall in oil prices has undoubtedly affected the rental value of certain types of commercial property in Aberdeen. The law in Scotland is, as you may expect, complex over what constitutes a “material change of circumstances” for business rates purposes.
Recent judicial opinions suggest that, in order to qualify, it must be something “significant” or “exceptional”. Examples of recent events that did qualify, allowing affected commercial properties to receive reduced rates, were the Edinburgh tram works, the economic recession of 2008 and the smoking ban.
There is no doubt that the collapse in oil prices is a major economic event for the north-east and this is therefore a matter that occupiers of commercial property in Aberdeen should consider with interest.
Occupiers may be able to submit an appeal if they consider the value of their property has been reduced due to the collapse in oil prices. A successful appeal could significantly reduce their property overheads, which in the current climate may help save jobs and improve business performance.
It is advisable to seek advice from an experienced business rates surveyor to provide guidance on appealing.
• Brian Rogan is head of rating at CBRE Scotland