28 February 2019

The 2015 revaluation, which took effect on April 1, 2015 albeit based on property valuations as at April 1, 2013, has only been dealt with, in part, by the licensed sector. The new 2020 valuation was benchmarked to April 1, 2018 and will form the basis of rates bills from April 1, 2020. The main objective of 
the revaluation is to equitably reallocate the rates burden across all non-domestic properties in Northern Ireland.  

The gap between revaluations also plays a role and that was the major reason why many valuations increased dramatically for the 2015 revaluation, in particular, districts such as the Cathedral Quarter and premises with a high proportion of food sales. The previous revaluation was introduced for the rating year commencing April 1, 2003 based on a valuation date of April 1, 2001. In the intervening 12-year period, the success and evolution of this sector, relative to other property sectors, resulted in some valuations increasing dramatically with some extreme cases seeing over two or three times of their net annual value.

Lessons have been learned by the Department of Finance that huge step changes in running costs caused by a long gap between revaluations are difficult for businesses to absorb. For the next revaluation, the gap will only be five years and, for that reason, I do not expect the movement in valuations to be nearly as dramatic as for the 2015 revaluation.

That is not to say valuations will not increase but, depending on whether a particular valuation goes up by more or less than the average across all non-domestic property valuations, this will determine whether a particular business sees an increased or decreased rates liability.

To recap, the rateable value of public houses and hotels is based on their trading accounts otherwise known as the Fair Maintainable Trade as, historically, most public houses and hotels in Northern Ireland are owner-occupied thus providing little rental evidence to provide an adequate assessment basis. Rates valuations are intended to represent the rental value of the property at the appropriate valuation date.

It is too early to predict how the hospitality sector will fare after the next revaluation. However, it is likely that the outcome generally could be slight.  As always there will be winners and losers. Either way, it is better to have some idea what the impact might be as early as possible so as to aid business planning.  Struggling provincial public houses where turnover has decreased over the last five years may benefit from an appeal and ultimately a potential saving. One of the main issues with the 2015 revaluation for licensed rate payers was that the scheme didn’t fairly account for the lack of profitability of an outlet related to its net sales turnover. For instance, establishments with a liquor licence with high food turnover felt aggrieved as their net profit margins were slashed due to the intense labour costs when compared to licensed restaurants whose net annual value was calculated on a rate per square metre based on the vicinity tone; thus not taking account of turnover or profitability.

Our advice is to engage an experienced rating surveyor, someone with a strong background in licensed premises, to review the valuation and take action as appropriate. Regardless of whether you are a winner or loser, you will want to make sure you are not paying any more rates than you have to. The legislation allows for a three-stage appeal process, but be warned that valuations can go up as well as down on appeal so it is important to have proper advice before taking any action. Osborne King is Northern Ireland’s largest independent commercial property company and has renowned specialism in the licensed premises and rating consultancy sectors. We are ideally placed to offer the advice you require to mitigate your rates liability as far as possible in keeping within the scope of the scheme produced by Land & Property Services.

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