Business Rates Restaurants and Leisure

Business Rates

Business Rates Restaurants and Leisure

Clients

DWD work for a wide range of restaurant and hotel operators across the UK helping them to manage and reduce their business rates liability.

We have an expertise in restaurant and hotel valuations acting for occupiers such as Jumeirah Carlton Tower, Jumeirah Lowndes and The Landmark London Hotels and restaurant operators such as Pizza Hut, Aqua Group, Patty and Bun, Wasabi, Kimchee, SushiShop, Chipotle Mexican Grill, Bird Restaurants and Frescobaldi.

Tax Structure

Two separate parts of government administer business rates.  The Valuation Office (VOA), part of HMRC, are responsible for identifying and valuing units of rateable property.  The tax is payable at roughly 50% of their opinion of the rental value of your property.  Local Authorities are responsible for identifying the ratepayers, applying the correct charging rules, issuing rate demands and collecting the tax.

Our tax mitigation work falls into two distinct parts:  Challenging the assessments created by the VOA and managing the charging process.

Business rates are a tax on the occupation of property.  Exemptions are available where property is not occupied.

To keep the tax base up to date all non-domestic properties across the UK are revalued periodically.  The latest general revaluation in Great Britain was effective from 1 April 2017, the next one will have effect from 1 April 2021.  The revaluation brings new challenges especially with regards to an aggressive transitional relief scheme and an entirely new business rates appeal process.

Sector Issues

Opportunities to mitigate business rate liabilities arise throughout the property lifecycle.

Prior to opening there will be opportunities to exploit empty property exemptions.  Where construction activity is involved in preparing a property it may be possible to remove the empty rate liability completely for many months or even years.

During the store’s lifetime there will potentially be refitting, reconfiguration or relocation projects.  Each of these events provides an opportunity to reduce the business rates overhead.  Rolling refurbishment programmes in hotel properties will open opportunities for rate mitigation strategies.

At the end of the asset’s life the empty property rate liability will need to be carefully managed.  Different strategies will need to be adopted dependant on the circumstances and whether the property will be held empty for a short or long term.

Appeals

For the 2017 Revaluation the government has introduced a new appeal system known as Check Challenge Appeal (CCA).  This has made the appeal process slower and more complex.  However, the underlying principles and opportunities presented by the rating system remain unchanged.

Operators will face issues relating to excessive valuations and changing circumstances that need to be managed.  Scaffolding or other disturbance can adversely affect value and be used to reduce assessments.  Similarly, the opening of a competing scheme or assets can impact on existing locations.

Different appeal types can be used to achieve different objectives: Correcting factual Issues, challenging opinions of value or adjust values to reflect changing circumstances.  In some cases, assessments can be reduced to £0 where significant and structural changes are being made to the property.

Restaurant occupations open entirely new issues for rating valuation purposes.  The exploitation of the boundaries between A1, A3 and A5 use classes for rating valuation purposes can be used to yield very significant reductions in rateable value.

Some classes of property, such as public houses will be valued on a receipts and expenditure approach.  The attention to detail and experience in preparing these valuation for negotiating assessments is of paramount importance.

At the basic level the facts, levels of value and methodology of each valuation needs to be tested.  An appropriate appeal strategy will be developed to suit the circumstances of each individual property and client.

Exemptions & Relief

During empty or part occupied periods exemptions may be available to mitigate your business rates liability.  Property occupied by contractors will often be regarded as empty for rating purposes.

For restaurant properties exemptions will not only occur at the beginning and end of the occupation but also during the midlife refurbishment of assets.  Where closed sites are vacant for an extended period prior to relinquishing the lease more imaginative solutions may be available to mitigate the rate liability.

For hotel properties the exploitation of discretionary reliefs during refurbishment programmes can yield very significant savings.

Business Support

Part of our mission at DWD is to take the hassle of business rates off your desk.

We will provide annual budget forecasts for your entire portfolio.  We’ll also provide budget liabilities for proposed assets that you may be considering taking.

We will check and authorise rate demands.  For some of our clients we act as the postal address for receiving demands and will only forward correct or corrected demands on to our clients’ accounts payable team that are correct for payment.

We offer advice on BID Levy issues as well as Business Rate Audit issues.  Every year we complete hundreds of Valuation Officer requests for rental information on our clients’ behalf.  This ensures accuracy and the appropriateness of the information supplied.