Budgeting for change
As you navigate the complexities of increased business rates for your independent school and the loss of the 80% charitable rates relief in April 2025, we understand that the financial pressures you face are more daunting than ever. Coupled with broader economic challenges and imposition of VAT on school fees from January 2025, ensuring precise and proactive management of your business rates is crucial.
Our schools’ specialists not only ensure your business rates are correct, but we also guide you with strategic advice and reliable support for more efficient business rates budgeting and risk management.
The cost of change
Charitable Relief & VAT
True to their word, the new Government have wasted no time in confirming the expected major tax hit on independent schools: the imposition of VAT on school fees UK-wide from 1 January 2025 and the loss of the 80% charitable relief on business rates from 1 April 2025 for private schools in England. The Rateable Values for most schools are based on rebuilding costs, resulting in significant increases with each rating revaluation. Now is the time to push for alternative approaches to the rating valuation of schools, reflecting the stark reality of the increased costs which they and parents face and the resulting impact on value.
Divided assessments
Where school sites are adjacent, save for the severance by a public highway, they have invariably been a single rating assessment. A significant court case on the linkage of floors within an office building has resulted in a more rigid approach. In some cases the VOA has divided school assessments. This does have the potential to increase overall liabilities.
A different approach
A property’s Rateable Value is intended to reflect a market rental value. With the general lack of rental evidence for schools, most continue to be valued on the ‘Contractors Basis’, taking rebuilding costs as the starting point. The rise in building costs over the last six years (circa 20%) has driven the increases in Rateable Values for the 2023 Rating List. This valuation basis is well established for schools, universities, and colleges, but there is no getting away from the inherent flawed assumption that cost equates to value
Within the major cities, there is some evidence of school rental transactions – particularly for smaller properties. However, for most schools, there is a view now that an alternative valuation approach could possibly be applied based on analysis of accounts and ability for the ‘hypothetical tenant’ to pay (i.e. a similar approach to hotels, cinemas, pubs etc). This may better reflect the financial pressures that schools will face going forward.
Impact of Revaluation 2023 on Independent Schools
Increases in Rateable Values show a mixed picture
The changes to the assessments of independent schools effective from 1 April 2023 showed a very mixed picture, with an average increase of about 12%, but a large number at around 20%. In some cases this masked the fact that the previous assessments were still under appeal. For most schools, valued for rating with reference to re-building costs (the ‘Contractors Basis’), the figures seem to be for ever-rising.
Regulatory compliance
England and Wales
Non-Domestic Rating Act 2023
The Non-Domestic Rating Act 2023 will introduce potentially onerous mandatory obligations on ratepayers to regularly update the tenure and physical details of all properties within their portfolios with the Valuations Office Agency (VOA).
Increasing the administrative burden on businesses, it will require prompt updates to the VOA and annual returns even where there are no changes, with penalty risks for non-compliance. The complexity of business rates management will increase with measures anticipated to be fully in place for the 2026 Revaluation.
Material Change of Circumstance (MCC)
Legislative changes to Material Change of Circumstance provisions took immediate effect in October 2023. They tighten the scope of MCCs in England so that new legislation, licensing regimes and guidance from public bodies will not be grounds for a change in Rateable Value between revaluations.
Completion Notices
For buildings that have been temporarily removed from the rating list during redevelopment, billing authorities will be able to issue Completion Notices in the same way as for a new building. The regulatory changes should be in effect from January 2024.
Scotland
Since January 2023, Scotland’s new legislation has transferred Valuation Appeals to the Scottish Courts Tribunal service. This entails strict deadlines and rigorous requirements for ratepayers and advisors. All appeals against valuations from April 2023 should have been submitted as a comprehensive case with supporting data by 31 August 2023. Learn more about how to appeal business rates in Scotland.
How we can help
Our team of experts, specialising in energy and renewables business rates, brings together vast experience and deep industry insight. Our goal is to help you identify potential cost-saving measures in your business rates, allowing you to allocate your capital where it matters most.
