IRRV Alert - week ending 18th October 2013
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CONSULTATION - NON DOMESTIC RATES REVALUATION 2015 - DECAPITALISATION RATES: CONVERTING COST TO RATEABLE VALUE
RATING POLICY DIVISION Longbridge House 20-24 Waring Street Belfast BT1 2EB Tel: 028 9034 7468 Fax: 028 9034 7435 Email: brian.mcclure@dfpni.gov.uk |
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NON DOMESTIC RATES REVALUATION 2015 - DECAPITALISATION RATES: CONVERTING COST TO RATEABLE VALUE
I am writing to seek your views on a consultation paper prepared by the Department of Finance and Personnel as a consequence of the revaluation of non-domestic property which will take place in 2015.
The consultation relates to the treatment of the decapitalisation rate as a result of the new revaluation exercise.
As part of the revaluation process properties are valued for rates by reference to an estimate of rental value (net annual value or NAV). Some properties are however rarely let and therefore their rental value has to be determined by reference to construction costs or ‘decapitalisation rates’.
The Department has today launchedatargeted consultation on its preferred approach for treatment of those decapitalisation rates as a result of 2015 revaluation. The full document can be accessed at the following link:
http://www.dfpni.gov.uk/rating-review
The main proposals put forward in the paper are that:
- for “Revaluation 2015” Northern Ireland harmonises with the decapitalisation rates (5% and 3.3%) used in England and Scotland;
- the Department of Finance and Personnel continues to prescribe by legislation the decapitalisation rates to be used;
- Northern Ireland does not follow the Welsh approach and set its own unique decapitalisation rates;
- Northern Ireland continues with two decapitalisation rates; and
- the Ministry of Defence (MOD) properties in Northern Ireland be moved from the lower decapitalisation rate to the standard decapitalisation rate.
Adopting lower decapitalisation rates, as the Welsh Assembly Government did for their last Revaluation in 2010, is not favoured as this would ultimately impact on the majority of business ratepayers. On the other hand it is difficult to justify the setting of higher decapitalisation rates, if account is taken of relevant market indicators such as the marked reduction in lending rates in recent years.
On balance, the broad proposals will establish a position of parity with England and Scotland and, should the consultation responses be in favour of this approach, no further legislation will be required as this was already legislated for by the Assembly back in 2009.
The one exception is in relation to the new proposal for the treatment of MOD properties. Should the outcome of the consultation process result in a decision to move MOD properties to the standard decapitalisation rate then a short piece of subordinate legislation would be required to be taken through the Assembly to give effect to that change.
The consultation will end on 10 January 2014. The document attached provides details on how you can submit any views you may have on the issue.
Should you wish to seek further clarification on particular aspects of the consultation paper then I am happy to meet with you to discuss the issue further.
Yours sincerely
BRIAN McCLURE
Head of Rating Policy Division
Department of Finance and Personnel