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Written Statement - Technical consultation on the decapitalisation rate used in non-domestic rating valuations in Wales

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Thank you for your time and co-operation in responding to this consultation. It would be helpful if you could use this questionnaire.
Leighton Andrews AM, Minister for Public Services

The Valuation Office Agency (VOA) is responsible for valuing all non-domestic property for the purposes of charging Non-Domestic Rates (NDR). New rating lists are usually compiled and published every 5 years. A revaluation was due to take place in 2015. However, a decision was taken by the Welsh Government to postpone the revaluation until 2017 following a decision by the UK Government to delay the revaluation in England.

The primary purpose of revaluation and the setting of the multiplier, is to adjust the liability of properties relative to other properties within the NDR tax-base. This ensures that the rate liability is spread fairly between ratepayers, and is based on up-to-date rental values. This, in turn, ensures that occupiers of all non-domestic properties in Wales will pay their fair share of NDR based on up-to-date rental values.

Work is now being undertaken by the VOA to ensure that all non-domestic properties are assigned a new Rateable Value based upon their estimated rental value as at the Antecedent Valuation Date of 1 April 2015.

The VOA uses 3 methods for calculating the rateable value of properties, depending on the available evidence. The Contractor’s Basis is used for specialised properties, when there is no evidence available about the rental value. Approximately 20% of all non-domestic properties in Wales are valued on the Contractor’s Basis. These properties include utilities, schools, hospitals, heavy industry, fire and police stations and airports, amongst others.

The decapitalisation rate is a key part of the Contractor’s Basis Method of Valuation. It is a percentage figure which is used to convert capital value into an annual rental value. It ensures the costs and benefits of owning a property, compared to renting a property, are taken into account when calculating the rateable value of a property. Since 1990, the decapitalisation rate has been prescribed in legislation.

The consultation is seeking views on whether decapitalisation rates should be prescribed in legislation, how many rates should be prescribed and how the rate(s) should be calculated. The consultation period will run for a 6-week period and responses are requested by 25 September 2015.

The consultation paper is being issued to local authorities and other relevant organisations with a technical interest in local taxation. It will also be published online.

This statement is being issued during recess in order to keep Members informed. Should Members wish me to make a further statement or to answer questions on this when the Assembly returns, I would be happy to do so.