Part 6: Improvement relief
The Valuation Office Agency's (VOA) technical manual for the rating of business (non-domestic) property.
1.1 In Autumn 2021 the government concluded its review of the ‘business rates system’ and set out its intention to bring forward a new relief for eligible improvement works. The Non-Domestic Rating (Improvement Relief) (England) Regulations 2023 (SI 2023 No. 1357) were published in December 2023 and came into force on 1 April 2024. The equivalent regulations in Wales are Non-Domestic Rating (Improvement Relief) (Wales) Regulations 2023 (2023 No. 1345 (W. 244))
1.2 The scheme aims to support businesses make improvements to their premises by giving twelve months relief from the higher bills which ordinarily result when qualifying works to an existing property increase the rateable value, mitigating any disincentive to investment that immediate higher bills may create.
1.3 To receive improvement relief ratepayers need to meet two conditions:
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the VO must be satisfied the improvements meet the definition of qualifying works – the ‘qualifying works’ condition
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the relevant local billing authority must be satisfied that in the period since the qualifying works commenced the property has remained occupied and that the ratepayer has not changed – the ‘occupation’ condition
1.4 The scheme is implemented in two steps.
1.5 Once the VO is satisfied that the qualifying works condition has been met, it will issue a certificate of the increase, if any, in rateable value attributable to any works falling within the meaning of qualifying works. If associated value suppressing works are undertaken which result in either no change or a decrease in rateable value, then the VO will issue a certificate at RV £0.
1.6 The billing authority apply the relief using the certificate but only if the occupation condition has been met.
1.7 The objective of the relief is to help occupiers who make improvements in support of their existing business premises. It is not intended to subsidise general commercial property redevelopment such as new construction or refurbishment. So for clarity, given that major works of redevelopment lead to deletion of a hereditament from the rating list, qualifying works exclude works where the property was not entered in a rating list during all or part of the period of the works.
1.8 The VO can be notified of alterations to a property by three possible avenues:
- a Report from the Billing Authority (BAR)
- a Check confirmation
- a VOR raised following an inspection
2.1 Qualifying works must result in a positive value once value suppressing activity has been accounted for. Any improvements which result in no overall changes in rateable value due to associated value-supressing activity, such as demolition works, will not be eligible for relief.
2.2 To fall within the meaning of qualifying works, the improvements will need to produce:
- an increase in the amount of the area of buildings comprised in the hereditament
- other improvements or upgrades to the property’s physical state which might include addition of heating, air conditioning, or raised flooring; or
- addition of rateable plant and machinery
- works associated with the above to the extent that the associated works reduce the net increase in RV resulting from the above works
2.3 Examples of the type of works which may meet the definition of qualifying works include:
- a business adds insulation or new lining to a previously uninsulated old industrial building resulting in an increased rateable value
- a business builds an extension to their property
- a shop removes a structural wall increasing its rateable value by making a rear storage area (previously behind the wall) available for retailing
- a business adds a mezzanine sales floor within its retail warehouse
- a large factory site builds a new building within the site area that forms part of its hereditament
2.4 A change of use, for example a change from a shop to a bar, would not on its own constitute qualifying works. But any of the works referred to at 2.2 associated with such a change of use might still be eligible.
2.5 Where a scheme of works results in a new hereditament, the VO must certify the change in rateable value attributable to the qualifying new works for the new hereditament. Where there have already been qualifying works to a property which is subsequently reconstituted by a split or a merger, improvement relief may remain relevant to that part subject to the qualifying works if it has continued to remain occupied by a qualifying occupier.
2.6 When calculating the change in rateable value, if any, attributable to qualifying works, regard must be had to any associated “value suppressing activities” which reduce the RV. This would include demolitions which are part of preparatory works undertaken ahead of constructing new buildings. In other words, it is the net effect of the whole works which must be certified. When deciding if value suppressing activities are works associated with other qualifying works, it will be necessary to consider geographical and temporal proximity.
2.7 The closer, in terms of location and time, value suppressing activities are to qualifying improvement work, the more likely it is that they are associated with the qualifying works and so should be considered when calculating the amount to be certified. Whilst there can be no hard and fast rules, it may be reasonable to assume that value suppressing activities within 6 months of qualifying works are associated with those works whilst similar value suppressing activities taking place 18 months before or after the qualifying works may not be associated with those works. In a similar manner, a demolition which took place prior to erecting a new building in the same location is likely to be associated with the qualifying works whilst a demolition elsewhere within the hereditament’s site may not be associated with the erection of the new building.
2.8 In most cases it will be apparent whether or not value suppressing activities are associated with qualifying improvement works but technical advice should be sought in cases of doubt. Where they are associated, the reduction in RV caused by the value suppressing activity must be reflected in the certified value for the qualifying works.
2.9 Examples of types of works which would not meet the definition of qualifying works include:
- construction of a new building creating a hereditament new to the list
- a programme of redevelopment which results in deletion of a hereditament from the rating list for the duration of the works where the substantially redeveloped property is then brought back into the rating list as a new
- repairs or replacement of old technology such as asbestos lining with a modern equivalent with no change in rateable value
- addition of land and/ or construction of a new building on such land outside the existing hereditament
3.1 The intention of improvement relief is to support ratepayers invest in their own active businesses.
3.2 To ensure support is not diverted to developers or landlords inheriting improvements from a previous occupier, after certification by the VO, billing authorities apply a further test - ‘the occupation condition’ and need to be satisfied that in the period since qualifying works commenced, the property has remained occupied and the ratepayer has not changed.
4.1 Where the qualifying works condition is met, a certificate will be issued by the VO of the increase in rateable value, if any, which is attributable to any works falling within the meaning of qualifying works.
4.2 The rateable value to be certified should reflect the net increase in the end RV attributable to the works. This means that the certified amount should reflect any rounding of the end RV. For example, if a property had an RV of £62,000 and £1,875 of qualifying works were completed the new RV, following the rounding rules, would be £63,750 so the certified RV would be £1,750.
4.3 Care must be taken where a revised valuation reflects qualifying works and other factors such as an amended value per £m2 or additional accommodation added many years ago. In these circumstances the case worker will need to first revalue the property adopting the new £m2 and reflecting the physical circumstances which existed before the qualifying works were completed. Once this has been done, the caseworker can add in the qualifying works so that the certified RV can be calculated by reference to the correct starting point.
4.4 A certificate will last for a maximum of one year after qualifying improvements have been completed and will have a daily effect for that year. The VO will be able to review the certificate should any part of the property affected by the qualifying works change during the year long life of a certificate, and the VO will be responsible for amending and reissuing a revised certificate.
4.5 Qualifying works with separate dates will require separate certified values although they may appear on a single certificate.
4.6 The certificate has effect from the date the circumstances requiring the certificate first arose until it is replaced or superseded by a later certificate due to changed circumstances.
4.7 Where a certificate is issued in error or reliant on information that proves to be false a certificate may be withdrawn or amended from the date the original certificate was issued.
4.8 If a request for a certificate is received and the VO considers there are no items which meet the requirements of the regulations then no certificate is issued. There is no appeal process in relation to certificates for improvement relief or against the VO decision where no certificate is issued.
4.9 Any case workers dealing with a case where the amendment or entry into the rating list is on or after 1 April 2024 will be required to certificate any qualifying works in accordance with guidance and demonstrate by way of CDB case remarks the thought process and a record where calculations are recorded.
4.10 Where a certificate is not issued – an ALL cases with an effective date on or after the 1 April 2024, a remark must be placed in the CDB providing an explanation to show that certification has been considered and why it is not required
5.1 RSA will retain a record of certificates issued, including amended certificates, so there is no requirement to store a copy of any certificate elsewhere.