Local Tax Flashcards
What is a rateable value? How is it determined?
A rateable value is an estimate of what it would cost to rent a property for a year, on a set valuation date.
This is determined by the Rating assumption which are:
* New letting
* Let on a year to year basis
* FRI terms
* In a good state of repair
* Tenant pays the rates
* Current use
* No significant alterations may be made on the property
What are the rating assumption
- New letting
- Let on a year to year basis
- FRI terms
- In a good state of repair
- Tenant pays the rates
- Current use
- No significant alterations may be made on the property
Talk through the CCA process?
- The ‘Check’ stage: Through which the ratepayer and the VOA agree (and if necessary correct) the key factual information about the property in question. Area of the hereditament, size of hereditament, condition (maybe)
- The ‘Challenge’ stage: Through which a ratepayer may make a challenge to the VOA’s valuation, and submit and discuss any relevant evidence. (Statement of Case)
- The ‘Appeal’ Stage: The ability for the ratepayer to appeal to the Valuation Tribunal for England (VTE), if no agreement has been reached with the VOA
When did the new CCA system come in to effect ? and why?
- April 2017 rating list
- Old system: proposal and appeal
- Old system resulted in many speculative claims with no supporting evidence, resulted in the system often being clogged up
- Also resulted in minimum engagement with the VOA until later on in the appeal process
Benefits of CCA?
- Support earlier and more effective engagement between the VOA and ratepayers, supporting (where possible) the resolution of cases without the need for an appeal to the Tribunal
- Drive the more efficient resolution of ‘straightforward’ or routine cases
- Ensure cases are supported with evidence and this is shared early in the process
- Help to reduce purely speculative proposals causing delays in the system
- Support more efficient use of VOA and VTE resources
CCA time limits ?
- Initial check, voa have 12 months to respond
- Rate payer must respond via challenge by submitted within 4 months of the check outcome
- When decision notice is issued, or if 18 months has elapsed from the date of proposal, this denotes the end of the challenge stage and the 4 month window for appeal begins
What are the different methods of valuation used?
- Comparable method
- Contractors
- Receipts and expenditure
What is the governing legislation for business rates?
- Local Government finance act 1988
What is the Contractors method of valuation?
- Where there is no rental evidence or trading detail to analyses. It involves estimating the yearly cost of a replacement property. Properties like, hospitals, schools and prisons are valued this way.
- Estimate of replacement costs
- Adjustment of replacement costs
- Value of land
- Decapitalisation
What are they key sections of the LGFA 1988?
- S41 – VOA duty to compile and maintain the rating list
- S43 – liability for occupied hereditaments
- S45 – liability in respect of unoccupied hereditaments
- S55 – enable provisions for proposals to alter the rating list
What are the assumption of the hypothetical tenant?
- New letting
- Let on a year to year basis
- FRI terms
- In a good state of repair
- Tenant pays the rates
- Current use
- No significant alterations may be made on the property
Name a piece of legislation that you have had regard to when determining a hereditaments rates liability?
- When considering hereditaments in common occupation I would have regard to the PICO act which determined that
- Where two or more hereditaments are occupied in by the same person, the hereditaments meet contiguity condition and none the hereditaments is used for a purpose which is wholly different from the purpose for which any of the other hereditaments is used
- Hereditament is treated as one
What is the AVD?
- The time in which the economic conditions for valuing are set
- Tends to be an earlier period
- For the 2023 rating list, the AVD is 1 April 2021. This is the relevant date on which the economic conditions are determined.
What is the material day?
- The material date is the date on which the physical conditions, what the hereditament seemed like.
- Often done at the start of the rating list, can be done quarterly
- Quite often that MD is on a different date
- Can value on economic conditions on one date and physical conditions on another date
- Material day is the day on which certain “relevant matters” are taken into account for valuation purposes when considering an alterations to a list.
What are the four elements to determine rateability ?
- BEAN
- Beneficial occupation
- Exclusive possession
- Actual Occupation
- Not too transient
How do you zone a shop floor ?
- Take measurements on an NIA Basis
- Segment shop floor in to zones 20ft deep (6.1m)
- Assess each area of the floor as a % of zone A
- 100% Za
- 50% Zb
- 25% Zc
- Other areas maybe assessed at a smaller percentage (storage space, second floor space)
What documentation do you provide clients with when setting up an instruction?
- Letter of instruction
- Appendix A of the RICS Rating Code of Practice
- Standard Terms of Business
- Guide to Government Gateway Registration
What must you include in a challenge ?
- The reason you are challenge (Grounds of the challenge) – valuation is wrong
- The evidence you have that the valuation is wrong – schedule of evidence, legal cases, photographs
- A statement that supports your challenge (statement of case) – how your evidence supports the grounds
- A proposed new RV and date it should be effective from
- Lease details from the property
Explain MCC?
- Material change of circumstance
- Disregard economic factors effecting the valaue of the property
- And regard only those material effecting the property
- In my example the subject hereditament was material effected by a significant redevelopment scheme which caused dust, noise and vibrations which materially effected the property
- Moreover due to the site hoarding there was diverted walkways to the subject and access to the underground car park was constrained
- As such the achievable RV did not reflect the achievable rent subject to the ratings assumption under these material conditions
- I used neighbouring assessments to benchmark the % of my allowance
- The % represents the ebbs and flows of the development cycle and is not explicit in the sense that a higher % is given for more disturbing stages and a lower is used for less disturbing.
- Material day is the start of the works
Talk me through your level 2 deletion ?
- Received an instruction to delete the hereditament from the rating list
- Our terms did not require me to inspect the property and so I requested details regarding redevelopment works these included: Photos, schedule of works, and Gannt chart
- I felt as though I had sufficient information to substantiate my check document on the basis that property was in capable of beneficial occupation without having to inspect the property
- I began to draft my check document which included these along side the legal basis for the deletion which was Monk v Newbigin and Jackson v Canary Wharf
- Since I have rotated out of the team the VOA have upheld my check and the office unit has been deleted
When would the property come back in to the rating list following a deletion?
- We would expect correspondence with the VOA with the providing a completion notice for the hereditament to be re entered in to the rating list.
- This mechanism is provided the LGFA 1988 which ascertains the day a hereditament is to be treated as complete. It specifies a completion date.
Criteria used to decide a completion date?
- The council’s visiting officers routinely visit the premises to establish how close to completion the premises are. Information will also be sought from the developers of the premises and the owners.
- It is important to remember that a completion notice may be served up to three months in advance of the day (S.46A of the 1988 Act) on which the council specifies that a property is complete. This means that sometimes, on the date that the notice is sent, the property may still not be complete. The important date to focus on is the date that the council is specifying as the date of completion in the completion notice
What if you disagree with the completion notice ?
- The regulations specify that if you disagree with a completion notice you should appeal within 28 days of the date of service of the notice to the Valuation Tribunal who are an independent body who make rulings on such matters.
Why did you include monk v Newbiggin and Jackson and canary wharf in your check?
These are the legal basis that regard beneficial occupation whilst a property is incapable of beneficial occupation
What is the difference between the two core cases laws regarding incapable of beneficial occupation?
Monk v Newbigin
* Regarded an office undergoing significant redevelopment works
* Although it was argued that a RV should be assessed in accordance with what a willing tenant would pay for the property concerned in line with the rating hypothesis. One of these assumptions being that the property is in reasonable state of repair and unless the landlord would deem these works un economical to undertake these repairs. VO argues that although the works were substantial, it would still be economic to undertake the repairs.
* In its judgement, the Supreme Court place great emphasis on the presumption of reality which underpins the rating hypothesis. On the relevant date, the property was not capable of being occupied as offices and was genuinely a property undergoing substantial works or reconstruction. The starting point should be whether a property can be beneficially occupied before the valuer begins to consider whether or not the property is in a state of disrepair or not. As the reality was that the property could not be occupied, as it had no services and no ceiling tiles and parts of the raised floors had been removed, the rating assumption that a property is in a reasonable state of repair did not bite.
Jackson v Canary Wharf
* Regarded 1 Canada Square Tower
* Following vacation of the tenants the floors were stripped back to shell
* Fitting out works started after a tenant was identified and therefore material day for the appeal fell during the ‘pause between strip out and fit out
* VO argued that the were no admissible evidence of a scheme of redevelopment capable of bringing the property within the umbrella of monk (no specific scheme of works)
* No specific end date
* In its judgement if a property is incapable of beneficial occupation, then it is not a hereditament
Talk me through your level 2 valuation challenge
- My company was instructed to identify business rates savings opportunities for occupiers located in a multi storey office building in Birmingham
- I reviewed each occupiers assessment on the VOA business rates page and carried out initial enquires with the client to ensure the factual accuracy of each assessment
- Once I had completed these initial enquires I then drafted and submitted a check document confirming basis of fact for the hereditaments basis of assessment
- Once I submitted the check, I began to investigate valuation of each hereditament through gathering comparable lettings that had occurred close to the rating lists valuation date. These included lettings that had occurred in the building. I contacted agents to ensure the accuracy of these lettings and obtain specific lease term in order to assist in calculate the net rents.
- Having analysed my comparables I managed to identify that the price per sq m applied to the hereditaments assessment did not align with net rental transactions that had occurred at the valuation date.
- I drafted my challenge document which included my schedule of comparable evidence and legal basis which was Lotus and Delta v Culverwell
- Since submitting my draft the challenge was up held by the VO and the assessment was amended.
What do you mean by rental tones?
- In multi let office building it is common rents per sq ft to be at a similar level due to the comparable qualities in floor plain and specification. Premiums maybe be placed higher floors.
- Tone of the list relates to how rates per sq m reflect this in the sense that 3rd and 4th floor of a 10 storey building will likely have a comparable rates per sq ft this is the tone of the building.
What would you include in your challenge document (valuation)?
- Current RV
- Statement of case – being that the RV is excessive, incorrect and bad in law
- Schedule of comparable evidence
- Photographs – multi let building and comparable are in that building
