Decapitalisation Rates are used in the calculation of the rateable value of certain properties. Such properties are those in which it is difficult to ascertain using normal methods. Normally these properties would include schools, hospitals, commercial process-plant, and utility buildings. But this might include buildings on private land for which it is difficult to apply a rate based on comparison or business-turnover. This might affect members who own buildings used as museums, charity-offices or other unusual purposes. Business tax is devolved in Wales, hence this consultation process from the Welsh Government. This initiative is intended to discern whether the decapitalisation rate should be prescribed in legislation, which rates should be prescribed and how the rate or rates should be calculated.
Date of issue: 8 March 2019
Consultation deadline: 30 May 2019
SETTING THE DECAPITALISATION RATES FOR THE NON‑DOMESTIC RATES REVALUATION 2021
Consultation Number: WG37394
Date: April 2019
- The CLA (Country Land & Business Association) is a well-established representative organisation covering England and Wales with a national office in Wales. We work closely with both the UK Government and the Welsh Government as a consultee-of-choice on issues concerning agriculture, land-use, housing and the rural business.
- We represent 30,000 members in England and Wales, around 10 per cent of whom are in Wales. The needs of the rural community are often under-represented in UK politics. Our membership footprint accounts for the ownership/management of around half of the rural land in both countries.
- While we participate as experts in agricultural issues, we offer expertise on the requirements of the whole rural community including issues affecting businesses concerning planning, investment and economic management, housing, connectivity and physical infrastructure and social issues which affect the rural economy. A key part of our role is consistently to engage with government and political representatives in Westminster and Cardiff. To ensure that the rural dimension is considered in policy and legislative development.
The Welsh Government is interested in comments you may have about setting the decapitalisation rates for the Non-Domestic Rates Revaluation 2021.
Q1 Do you agree Welsh Government should continue to prescribe the decapitalisation rates used in the Contractor’s Basis of Valuation?
Yes, CLA Cymru in Principle agrees with this proposal.
Q2 Do you agree that the Welsh Government should continue to prescribe two decapitalisation rates in Wales?
Yes, CLA Cymru in Principle agrees with this proposal, as long as it is not extended beyond its current limits, being: healthcare, education, defence and public conveniences.
Q3 Do you have any views on the methods for setting the decapitalisation rates (including any suggestions for alternative methods), on the range of values generated by each method, or on the merits or otherwise of each method?
It is quite clear from reading the consultation that there are number of methods available, each has its strengths and weaknesses. It is also clear there is no ‘one size fits all’ approach due to the specialised nature of rating specialised buildings and property which this method is designed for.
Prior to 1990 this approach was somewhat less clear cut. Any opportunity to allow clarity to businesses, both in the private and public sector should be welcomed, as it will ensure a degree of more accurate budgeting and forecasting which any business is always crying out for.
I would suggest that as there are a number of methods at the disposal of the Valuation Office Agency (VOA) to arrive at a figure, they must use the best method that suits that individual hereditament to the benefit of the ratepayer concerned and it is used in a fair and disproportionate way.
Q4 Do you agree with the Welsh Government’s proposed approach for setting decapitalisation rates in Wales?
Yes, in principle, CLA Cymru agrees with the approach as outlined in this consultation, we however refer to the comments in Q3 above.
Q5 The Welsh Government would like your views on the effects these proposals would have on the Welsh language, specifically on:
i) opportunities for people to use Welsh; and
ii) on treating the Welsh language no less favourably than English.
What effects do you think there would be? How could positive effects be increased, or negative effects be mitigated?
The CLA Cymru policy on Welsh language is that the Welsh language should be used in a positive capacity not in a negative or discriminatory capacity. Where there is legitimate value to be added to a business operation through use of the Welsh language or there is a desire from the owner / land manager to conduct business through the Welsh language then this should be encouraged and supported. People who do not wish to do this should not be treated negatively. The Welsh language is a positive marketing tool for Wales with far-reaching benefits if treated correctly.
Q6 Please also explain how you believe the proposals could be formulated or changed so as to have:
i) positive effects or increased positive effects on opportunities for people to use the Welsh language and on treating the Welsh language no less favourably than the English language; and
ii) no adverse effects on opportunities for people to use the Welsh language and on treating the Welsh language no less favourably than the English language.
Please see our comments in Paragraph Q5 above.
Q7 We have asked a number of specific questions. If you have any related points which we have not specifically addressed, please use this space to record them.
It is also clear that many of our members will not be affected by this type of rating method. However as the industry and our members will be forced to change their business models in light of the changing nature of rural enterprise and with the inevitable issues Brexit will force on the rural environment, this method of trying to place an NDR on potentially unique rural assets may be an issue. To many of our members the idea of suddenly becoming within scope of Business Rates due to a diversified enterprise becomes as a complete surprise. Then the main issue would be for the VOA having the necessary expertise in being able to effectively assess a fair and reasonable RV for a unique rural hereditament.
Rural diversification relies on original thinking and where assets have been subject to diversification, due to an individual’s ingenuity and entrepreneurial skills, this method of determining the NDR may be the only way it can be achieved. For example converting an old nuclear bunker for glamping. By using a method for much larger assets (Military assets or Hospitals) this method of arriving at a NDR may put our members at a significant disadvantage if this method of valuation is not used properly. It may lead to members being discouraged in looking at alternative income streams. This was certainly the case when people in recent years diversified into renewable energy to find an excessive business rates bill waiting for them, which has subsequently thrown their budgets. I do however appreciate this cannot solely be put down to the subject matter of this consultation. However it is a good example of an unintended consequence of someone looking to diversify their existing business.
For further information please contact:
CBP de Winton MRICS
CLA Wales, Orbit Business Centre,
Rhydycar Business Park,
Merthyr Tydfil, CF48 1DL
Tel: 01547 317085