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Business rates system scores own goal

By James Buckley - Wednesday, May 09, 2018 8:24

The Valuation Office Agency, which calculates the business rates paid by football clubs, needs to show greater flexibility and fairness, according to Colliers International, the global commercial real estate consultancy and agency, and to recognise that relegation represents a material change in the club’s circumstances.

As the 2017/18 football season draws to a close, Colliers looked at the rate bills football clubs paid this year and look likely to pay next year, many of which highly fluctuated following the delayed 2017 Ratings Revaluation. When assessing a club for its business rates bill, the VOA looks at the cost of the stadium as well as its ability to pay, with the result that those clubs that were in the Premier League at the relevant valuation date (1 April 2015) were deemed to be able to pay more than those in other leagues.

“Premier League clubs are recognised as being able to earn a minimum of £100 million a year purely as a result of sponsorships and TV rights” said John Webber, Head of Business Rates at Colliers, “bringing in much more revenue than those clubs in the Championship or League One.”

“However, if a club is relegated to a lower division, there is nothing in the current VOA’s approach to note that this is a “material change” and the club faces a double whammy of high rates combined with often significantly reduced income.”

Webber takes the example of comparing the fortunes (and finances) of Sunderland and Wolves. When Sunderland’s Stadium of Light was valued for business rates in 2017, the club was in the Premier League and its rateable value (RV) was increased by 86% between 2010 and 2017 from £1.9 million to £3.53 million, giving the club an annual rates bill of £1.38 m in 2017/8, going up to £1.74 million for this coming year. Yet during this time Sunderland has been relegated from the Premier League (thus losing up to £100million of income) to the Championship and has been now relegated again to League One, with even lower income prospects. However, its annual rates bill is due to grow to £1.9 million by 2021/2 if nothing is done to help or the VOA refuse to accept the club has had a “material” change in its circumstances.

Comparing to Wolves: Wolverhampton Wanderer’s Football Stadium was valued when the club was in the Championship, giving it a rateable value of £685,000, and thus an annual rates bill of £328,000 in 2017/8 and £338,000 this year. The club has now been promoted and will play next season in the Premier League, where it will receive at least £100 million of income from TV rights etc.

“Of course, stadium size is a consideration when calculating a club’s rates bill” says Webber, “And Sunderland’s stadium at full capacity of 49,000 can hold 58% more fans than at Wolves which can hold 31,000. But this should not mean it should be committed pay a rates bill over 5 times the size!”

In fact, as Sunderland will next season play in League One, Webber calculated that Sunderland’s Rateable Value of £3.53 million is not far off the total of all the football clubs currently in League One put together- the latter having a RV of £4.35 million in total!

“Sunderland is paying a massive rates bill compared to its current circumstances, “says Webber and “the VOA must reflect this. Similarly, Southampton and Stoke City which saw 296% and 293% increases in their RV between 2010 and 2017 are also clubs that may very well be relegated from the Premier League this year and we believe will be paying too high rates compared to their circumstances.”

“We are talking about six clubs a year that move up and down between the Premier League and the Championship. Given the disparity in income generated by being in these leagues, it would not take much work for the VOA to recognise there has been a material change of circumstance for these clubs.”

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