18 September 2000

DFP MINISTER ANNOUNCES A REVALUATION FOR NON-DOMESTIC PROPERTIES IN NORTHERN IRELAND

Mr Mark Durkan MLA, Minister of Finance and Personnel, responsible for rating and valuation policy, has announced a revaluation for rating purposes of all non-domestic properties in Northern Ireland. The Minister was responding to a question in the Assembly from Mr Alex Attwood MLA, who asked what plans the Minister had to carry out a review of rateable values.

The Minister acknowledged that the current Valuation List did not reflect shifts in property values which had taken place over the last few years. He added that, in order to correct the associated imbalances in the rates burden, a revaluation of all non-domestic properties would now be carried out. Domestic valuations would be unaffected by this but the situation with regard to the domestic sector would be kept under review.

Mr Durkan said, "Work on the revaluation will begin immediately and will be carried out by the Valuation and Lands agency. The new valuation list will come into effect on 1 April 2003 and any ratepayer aggrieved by his or her new valuation will have an opportunity to appeal."

Giving further clarification, the Minister said: "One of the main objectives of the revaluation is to create greater fairness by taking into account recent changesin property values. Following a revaluation there will be a much closer, fairer and uniform relationship between the current values of properties and their rate liability."

Commenting on the announcement by the minister, Mr Nigel Woods, Commissioner of Valuation and Chief Executive of the Valuation and Lands Agency, said:

"I welcome the Minister's announcement to proceed with a revaluation of non-domestic property. It comes at a time when we are already witnessing some imbalances building up in the tax base as a result of differential levels of rental growth since the time of the last revaluation. Taking corrective action now to address these imbalances will restore the relativity between assessments and prevent greater disparities arising in the future.

"The much reduced time span between revaluations will also help ensure that the redistributive effects are kept within reasonable bounds. The revaluation in 1997 was carried out after a gap of 20 years and precipitated some very dramatic swings in rate liability. A revaluation in 2003 will substantially avoid a repeat of this situation."

In commenting further, Mr Woods said:

"It is not possible at this stage to speculate on the detailed outcome of the revaluation in respect of its impact on individual properties or locations. The full picture will only emerge when the exercise is nearing completion. The overall effect, however, will be that all business occupiers will pay in direct proportion to the rental value of their property as at 1 April 2001 rather than on the basis of the 1995 value as they do at present.

"The provision for rate relief afforded to certain industrial property, sports clubs etc will not be affected by the Revaluation. Any ratepayer aggrieved with their new valuation will have rights of appeal including an appeal to the independent Lands Tribunal."

 

NOTES TO EDITORS:

Non-domestic properties are all rateable properties that are not private dwellings or associated garages and stores. There are some 68,000 non-domestic entries in the current Valuation List ranging from hospitals to supermarkets, playing fields to power station.

In general terms it is expected that the total value in the List will increase by around 25% to reflect the updated values. However, this does not necessarily mean higher rate bills. The total revenue to be raised from commercial rates in the revaluation year will only increase by the normal amount, i.e. whatever is dictated by the setting of the regional and individual district rate.

It is only the distribution of the total rate burden between individual ratepayers that is affected by a revaluation, not the overall yield. For example, at the time of the last revaluation in 1997 rateable values increased on average by 630%. This resulted in a corresponding reduction in the average rate poundage from £2.50 to 40 pence. Other things being equal, an average increase in rateable values of 25% in this revaluation should see rate poundages fall back to around the 40p mark again. This means that a ratepayer whose valuation increases exactly in line with the average for the List as a whole will see no change at all in his or her rate bill resulting from the revaluation.

The maintenance of the Valuation List and the preparation of the revaluation is the statutory responsibility of the Commissioner of Valuation, who is also Chief Executive of the Valuation and Lands Agency (VLA). The VLA operates from 7 District Offices located throughout the Province, each managed by a District Valuer. The VLA (formerly the Valuation Office) has been responsible for assessments since the inception of Ireland the rating system in its present form under the Valuation of Ireland Act 1852.

 

FURTHER BACKGROUND NOTE:

The basis of valuation for rating purposes in Northern Ireland is the same as that used in England, Scotland and Wales, that is, the estimated rental value of a property. Non-domestic rates are also levied in the Republic of Ireland where proposals for a revaluation are contained in a recently published Bill. The last revaluation in Northern Ireland was carried out during 1995 and 1996 and the Valuation List came into force on 1 April 1997. Since coming into effect the List has been maintained having regard to the level and pattern of values which existed on 1 April 1995. This means that an altered property, or a new property coming into the List for the first time, is assessed on the basis of the value it would have had more than 5 years ago reflecting the physical state and economic circumstances of the locality at that time.

Property values, however, have changed over that period and the Valuation List is now out of date. Value changes are not confined merely to the effects of inflation but more significantly are also caused by social, environmental and economic factors. These have created shifts in the relative values of property today compared with the pattern of assessments in the current List. These shifts are widespread and exist within and between different classes of property and between one location and another.

The continuing use of rateable values based on outdated rental values acts to distort the fair distribution of the rate burden between ratepayers. For example, businesses in areas which have experienced economic decline since the last revaluation will now be paying relatively too much in rates whereas businesses in areas which have benefited from improved economic conditions in the intervening years will now be paying relatively too little. The decreasing credibility of the List cannot be corrected without a revaluation.

Revaluations are carried out every 5 years in GB and the latest revaluation there took effect on 1 April this year. This cyclical nature helps ensure that the redistributive effects in terms of liability swings are kept within reasonable bounds. Failure to carry out a local revaluation now would not only mean that NI would fall farther behind GB but the inequities which are gradually building up within the current List would continue to increase. If corrective action is not taken in time this could result in large rate increases like those experienced by some ratepayers in 1997 caused by the 20 year gap since the previous revaluation.