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Member Briefing: Show Home Valuation from April 2015 for review

Date: 14/11/16

Show Home Valuation from April 2015 for review

Show homes are subject to non-domestic rates and for many years they have been valued by the Valuation Office Agency (VOA) using the “rentalisation” method .The VOA have argued that the value to be applied using this method is 6% of the estimated sale price of the show home, based on market evidence of sale and leaseback deals. 

HBF has never accepted that this was the best methodology for valuing showing homes and has always considered that it produced high valuations. We have thus been working with Gerald Eve to enable us to challenge their methodology such that we can secure a revised rate from April 2017. 

We are very pleased to be able report that we have achieved some significant concessions which will be to the benefit of all members. 

The recently published draft 2017 Rateable Values for England and Wales show that from next April the rate will be calculated at 5.5% of estimated sale price at 1 April 2015 (the antecedent valuation date), rather than the 6% which applied for previous rating revaluations. Gerald Eve have spoken to the Valuation Office, who assure us that this has been implemented, as agreed. This is also confirmed by the VOA internal “rating manual” which has just been made available online. 

Based on Gerald Eve’s downloading of the Rateable Values for England, the values will increase by 9.1% and the Government have already announced that, in order to maintain the same level of income in real terms, the Uniform Business Rate (UBR) for 2017/18 will be 46.7p in the pound - a reduction from the current rate of 49.7p in the pound. The figure for Wales is still awaited. 

The other very significant factor is the extent to which increases and reductions will be phased in over time – Transitional Relief. On the Government’s preferred scheme, where there would be a substantial increase in liability (on the basis of RV x UBR), the annual increase in actual rates paid next year will be capped at either 5% or 12.5% plus inflation (depending on size). There will also be provisions to phase in the benefit of reductions in liability. For the very small number of show houses with a new Rateable Value over £100,000, where the figure has increased substantially, the cap would allow the increase in actual payments for 2017/18 to be as high as 45% plus inflation.

It seems reasonable to assume that, at any one time in the coming years, there will be broadly the same number of show homes entered in the Rating List. Gerald Eve have estimated that our joint approach with the Valuation Officer earlier this year, with the percentage reduction from 6% to 5.5%, will save a total of over £11million to members over a five year period.

Whilst this is clearly progress, HBF and Gerald Eve are still not convinced that the Valuation Office approach is reasonable. However, based on our discussions with the VOA, it is clear that it will take the pressure of the house builders carefully co-ordinating appeals to persuade the VOA to move further. We are advised that no appeal actions can be taken until April next year and the new “check, challenge, appeal” regime will make it more difficult than previously.

Whether members choose to use Gerald Eve or an existing advisor, we consider that it would be beneficial for members and their advisors to liaise closely with them in order that we can all ensure a carefully co-ordinated appeals strategy across the country.