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In Focus: Injury Time For Rating Appeals - Montagu Evans

Mon 27th Feb 2017 | Money & Finance

Football clubs across England, Wales and Scotland are bracing themselves for the formal publication of new rateable value assessments at 1 April 2017 with some increases as much as 300%.

All clubs will be minded to carefully budget for business rates across the next five financial years and will, by now, be aware that large liability increases as a result of the general revaluation may need to be challenged.

Following the publication of draft assessments in England and Wales on 30 September 2016 the overall increase in rateable values across the English Premier League and Football League for stadia sits at 12%.

While the full force of increases will be experienced over the next 5 years, for the small number of assessments that have decreased (by up to 49%) liabilities will fall incrementally by 2022 and the full benefit of liability reductions will not be enjoyed immediately. For all clubs the publication of new assessments will now permit finance directors to budget up until 31 March 2022.

In Scotland the revaluation (published in draft in December) has not resulted in such large ‘swings’. The SPL overall is due to benefit from a fall in assessment of about 3%, although the largest single increase is still as much as 65% and, while a statutory ‘transitional relief’ scale applies in England, it does not apply to Scotland.

The largest increases have affected Southampton, Stoke, Hull, Crystal Palace, Burnley, Swansea and Leicester (all up by over 200%). The biggest winners are Sheffield United, Bristol City, Plymouth and Crewe (all down by over 40%).

The revaluation process across the UK (excluding Northern Ireland) has taken two years to complete. Not surprisingly reliable open market rental evidence is in short supply for stadia anywhere in the UK and the result is that league stadia have been assessed by reference to ‘replacement build cost’.

Montagu Evans regard the method as a fair and objective one as long as the Government assessors are consistent in their approach and accept that, given the heavily ‘branded’ nature of stadia arena, due allowance is made to reflect regional factors and the inherent risks affecting the ability of each club to pay rent as a derivation of build cost.

The acceptance in principle of ‘ability to pay’ is not enshrined in law but is a matter of precedent that Montagu Evans have persuaded the authorities to accept. It means that each stadia is accepted as only suitable to be used by one particular operator club and that demand is as a consequence limited to one occupier in each case.

The rateable value is, however only one-third of the liability calculation. The other factors contributing to the rate liability calculation are the respective Uniform Business Rate (UBR) applicable to each nation plus the imposition of ‘transitional relief’ in England. The multiplier (UBR) will range from between 47.9p in England to 49.2p in Scotland.

Subject to transition (in England) rates payable amount to just under 50% of rateable value. ‘Transition’ in England phases large increases year on year, but also phases large decreases. The former is a very steep curve, the latter rather shallow. In reality increases of up to 300% in rateable value will be fully phased out within 5 years (by 2021-22), while decreases will be limited over 5 years to a maximum of 20% for English clubs, even where assessments have decreased by significantly more.

What happens next?

On 1 April 2017 the opportunity presents itself to test the rateable value assessments applied to each club’s own stadium, training ground, academy and any other occupied (or empty) rate liabilities. The regime governing any assessment challenge will vary between England, Scotland and Wales, quite significantly. Ratepayers should resist the temptation to launch into any challenge or appeal without having carefully checked the ramifications.

In England the Westminster Parliament is expected to regulate matters through a previously untested ‘Check, Challenge, Appeal’ process. The defining features include a 12 month factual check upon application by the ratepayer. Any check decision is open to a formal challenge (including a detailed valuation and supporting evidence), finally followed by an appeal. Arrival at the final stage could take up to 34 months.

The Scottish and Welsh systems will follow a tried and tested appeals process with a 6 month limit in Scotland. Clubs in Scotland need to ensure that a competent appeal is registered before 1 October 2017.

Montagu Evans urge ratepayers in the football sector to properly consider their appeal options by reference to the relative modernity of their facilities compared to others of a similar quality and size, the potential for ‘superfluity’ adjustments (where maximum gates do not reach the stadium capacity) and the club’s ‘ability to pay’ a rent by reference to a maintainable income at the relevant valuation date (April 2015).

Finally, the clock is ticking with regards to opportunities to appeal and reduce the current assessment (in England and Wales) with potential savings as far back as 1 April 2015. Proper professional advice is critical at this stage and due diligence is an absolute necessity in identifying relevant and disadvantageous ‘material changes’, including either those physical factors causing an (additional) operational cost to the club or affecting income generation. 

For further information please speak to Richard Wackett on 0161 241 8201 or visit www.montagu-evans.co.uk.

Posted by: Aaron Gourley 

If you have any football business related news stories you’d like to share then please contact us – agourley@fcbusiness.co.uk

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