The draft figures for the 2023 revaluation have been published by the Valuation Office Agency (VOA) and will go live in six weeks’ time.
Rates bills for 2023/24, based on new rateable values (RVs), will be sent out by Billing Authorities in the next four weeks, and from 1st April, an RV can then be appealed, and ratepayers and their agents can engage in conversations with the VOA.
As a ratepayer, you may be aware that these changes will directly influence what you pay annually in business rates until March 2026. Here we preview how this will affect different areas of the healthcare sector.
The Government has revalued all commercial properties in England and Wales, using a fixed antecedent valuation date (AVD) of 1st April 2021. According to the draft 2023 rating list, the healthcare estate in England and Wales across all health sectors (private and public) has increased by 15.1%.
Different healthcare assets are valued differently, however. Non-purpose-built healthcare estate is valued on a rental basis, while purpose-built healthcare estate is valued on the contractor’s valuation method, using build cost as the starting point. Here, the build cost indices between 1st April 2015 (the previous AVD) and the AVD for the forthcoming revaluation have shown that healthcare construction costs have increased significantly between these two points in time.
At this stage, the leading cause of the increase in RV appears to be this change in build cost. For example, the build costs for acute hospitals have increased from £2,000 to £2,600 per sqm for premises constructed pre-31 March 2010. For premises built post 1st April 2010, the build cost has been altered from £2,750 to £3,479 per sqm.
Looking at this in further detail, we can see that purpose-built surgeries, clinics and health centres that have been valued on the contractor’s method of valuation have increased by 10.1%, whilst those valued on the rentals basis of valuation have increased by 13.9%. Hospitals and NHS clinics have increased by 17.4% between the 2017 and 2023 revaluation. The analysis will be carried out on new build hospitals at or around the AVD to test if these values applied by the VOA are reasonable or need challenging.
At the same time, there are additional changes which will have influenced the increases, such as changes in long-stay exemptions which have been applied by the VOA. We are eagerly awaiting the full details of the valuations to be released by the VOA to be able to digest this information further.
However, there is some relief for ratepayers seeing significant increases in RVs. The Chancellor announced in the Autumn Statement that the multiplier would be effectively frozen in 2023/24, stripping out the annual inflationary increase. Additionally, whilst the downward transition has been removed, benefiting those ratepayers whose RVs have decreased significantly, the upwards transition is still in place, protecting those who would see significant increases next year.
Please feel free to get in touch if you are unsure or require any further information on this.