Business rates surgery with CBRE Scotland

The Mazars case will have 'far-reaching consequences' for many ratepayers in Scotland. Picture: John Devlin
The Mazars case will have 'far-reaching consequences' for many ratepayers in Scotland. Picture: John Devlin
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In this series of articles, CBRE Scotland answers questions on business rates – this week looks at the handling of large rate assessments.

Question: I understand that at the 2017 revaluation the Scottish assessors intend to split many large rate assessments into numerous smaller assessments. Why is this being done and what will be the impact?

Brian Rogan: Your understanding is correct and the reason assessors intend to do this is to follow a recent precedent set by the UK Supreme Court in an English rating case, Woolway VO v Mazars.

The Woolway VO v Mazars case reviewed the principles for determining when properties should be assessed jointly or separately. Currently many separate properties or parts of the same property which are contiguous to each other and held on a single lease and under the control of the same ratepayer are assessed jointly, in other words as a single unit of assessment with a single valuation.

However, in Mazars the Court decided those features alone are insufficient to warrant a single unit of assessment unless there is also exclusive interconnection between those properties or parts. Where interconnection is not exclusive, ie via a common or public area, the properties or parts should be separately assessed.

This decision reverses a long-established rating valuation practice and it will have far-reaching consequences for many Scottish ratepayers. It will not only be an administrative issue resulting in more assessments, rate demands and rating appeals; it could also have profound and adverse valuation and liability impacts.

As larger single units of assessment are split up into their separate component parts, valuation allowances for quantum, layout, poor interconnection and so on will be reduced or removed altogether. In other words, the sum of the separate values making up the whole could be much greater than the combined single value of the whole and the resulting rate liabilities will be proportionally greater too.

Whilst Scottish assessors are not bound to adopt the same decision as the Supreme Court, most have signalled they will give effect to the decision at the 2017 revaluation. We recommend you seek advice from a reputable rating consultant on whether this case could impact your assessments and liabilities and, if so, how that impact might be minimised.

READ MORE: Business rates surgery with CBRE Scotland – the upcoming review of the rating system

• Brian Rogan is head of rating at CBRE Scotland

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