Upper Tribunal Ruling on Business Rates and Premises Valuations
In January 2015, the Upper Tribunal (Lands Chamber) made a ruling (accessible here) that has implications for how business rates are calculated for practices occupying purpose built GP premises. The ruling has implications for practices in England and Wales. The tribunal examined the way in which purpose built GP surgeries are valued and what kind of valuation methodology should be applied.
The impact of the ruling is that surveyors evaluating purpose built premises must now adopt a valuation methodology which could considerably reduce the valuation of the property for business rates purposes.
As business rates are reimbursable under the Premise Costs Directions, any reduction in business rate should have no impact on the practice. However, as it is reimbursed cost, this is an area where NHS England (or the Health Board) can recoup costs.
There are a number of important points to note. It may transpire that Area Teams attempt to pressure practices into appealing their current business rates. Any appeal to the Local Authority regarding business rates may only be made by the practice. As such it is entirely at the discretion of the practice and they are under no obligation to comply.
Although it hasn’t been explicitly stated, please be aware that any rates rebates from the local authority to the practice will almost certainly be clawed back by NHS England or the Health Board (for Wales). We are also aware that some legal firms are approaching practices about applying for a rebate. Given the reimbursable nature business rates practices would receive no financial advantage in doing so but may be left with subsequent legal fees.
GPC is also unclear about the broader implications of this ruling. One of our concerns is that a reduction in rates could impact upon subsequent reviews of notional rent. Whilst it’s believed that the risk of this is minimal we are in the process of acquiring further professional advice as to any potential impact. We will update LMCs about this shortly.