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Business, taken personally.

Business rates: legislation and case law collide

Posted by Lotty Reeves on 26th January 2017

Rents are in some places steadily recovering from the lows of 2009/2010 with strong growth in some sectors and localities.  For the property sector as a whole however, there has been little if any rent increase since 2008. 

The Legislation

Business rates are set to be revised on 1 April 2017, when they will start to be calculated by reference to rents in 2015.  The current system, introduced in 2010, was based on the rental levels of 2008 which were at higher levels than today owing to several years of sustained growth. 


The changes being implemented will see small businesses potentially benefit with all non-domestic properties with a rateable value of £12,000 or less no longer paying business rates.  In addition, those whose properties have a rateable value of between £12,000 and £15,000 will now receive tapered relief. 


Business rates for grade A office space and prime industrial units in the North East are expected to rise by around 8 – 10%.  Most businesses however, occupying other types of properties above the £15,000 relief threshold will be largely unaffected or will see a reduction. 


The case law – “Mazars – v – Woolway”

A recent supreme court decision in Mazars v. Woolway has led to the VOA having to revise its business rates valuations of properties where occupiers use two or more separated spaces within a building.  It is now a legal requirement for Valuation Officers to treat different areas of the same building, even though access through the same communal areas, as separate premises for the purposes of business rates.  Prior to the court decision, Valuation Officers had valued separate but neighbouring floors occupied by the same business as a single property. 


Below are a number of examples as to how this will impact on business rates of office accommodation.  



Previously, Company A and Company B would have received one assessment for both their floors. Now, Company A and Company B will each receive two assessments, one in respect of each of their floors.


Company A occupies all seven floors of an office so the building is treated as one property


Company B occupying three floors will have three separate business rate invoices, Company A occupying the remainder of the building will have four.




Each company will have one business rates assessment for its respective floor




Companies A and C will each have two assessments, one for each of their floors. Although Company B has use of the communal stairs and lift, it will have one assessment for its three floors as they form one self-contained unit.



The changes to legislation may change your business rates from 1 April 2017 whereas the impact from case law changes are likely to be backdated to either 15 April 2015 or the date upon which you took occupation of the premises.

As it will take the Valuation Officers time to process these changes, it may be prudent to seek guidance from your local office if you suspect your premises will be affected.


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