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Opportunity to claim back overpaid business rates on refurbished properties

Business rates experts at Alder King say property owners who have paid Empty Rates on a property while it underwent refurbishment over the past four years can now make a backdated claim for a refund.

The news follows a recent Court decision by the Upper Tribunal (Lands) which rejected the Valuation Office Agency’s claim that a property undergoing refurbishment was ‘in repair’ and therefore liable for Empty Rates.

Alan Morrish, partner at property consultancy Alder King, said: “Rates used to be a really simple tax. When you occupied a property you paid rates and when you did not, you did not. Then the government changed the law and made owners liable for full rates on empty properties.

“To compound the agony, the Valuation Office Agency (VOA), the government body responsible for rating, has been taking a really hardline stance of late, especially in relation to buildings being refurbished.  The net result has been a flood of recent case law as owners undertaking refurbishments rightly seek to mitigate their empty rates bills.

“The better news is that, in almost every case which has been to Court, the ratepayer has been successful.  The latest decision from the Upper Tribunal (Lands) has now opened the doors for property owners to make a claim for overpaid rates for properties which underwent refurbishment as far back as 1st April 2010.”

Latest case

The latest case concerns a refurbishment of an empty office in Sunderland where the owner stripped an office back to its shell. The heating, air conditioning and electrical systems were removed in preparation for a comprehensive fit-out.

Rating law assumes that a property is in a state of reasonable repair, whether this is the case or not. The alternative would be an endless spiral of appeals and arguments about whether some minor item in disrepair should be taken into consideration in arriving at the correct rateable value.

The VOA of late has been taking this “in repair” doctrine much further by arguing that, as a general rule, buildings which are in the process of being refurbished can be assumed to be in good order.  By applying this perverse logic, the owner remains liable for full empty rates while a refurbishment programme is taking place.

With admirable verve, the Upper Tribunal (Lands) rejected this argument out of hand. The Tribunal said the replacement of major building elements, such as an entire electrical circuit, heating and air conditioning, go far beyond the meaning of repair. It is also fundamentally clear from the reasoning of the decision that if a building could not be used because it is in the hands of contractors in the process of comprehensive stripping out works, then empty property rates are not due.

Scope to look back to 1st April 2010

Alan Morrish continued:It remains to be seen whether the VOA will be successful in an appeal against the decision. That said, property owners should be aware there is scope to look back to as far as 1st April 2010 to obtain a refund on overpaid rates if a refurbishment scheme has taken place.”

Further advice on this or any other aspect of Business Rates is available from Alder King’s Business Rates team.

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