The latest consultation setting out how the government intends to implement measures it set out in its business rates review at the end of October is totally “underwhelming” according to business rates experts at Colliers and has consequences that should certainly raise a red flag. As a result, Colliers is urging its clients and businesses to respond before the 22 Feb deadline next week.
Colliers is concerned about:
1 Measures to enable more frequent revaluations
Whilst business rates experts welcome that the government’s commitment to more frequent revaluations from 2023 as it moves to a 3-yearly revaluation cycle, the trade-offs, enabling the VOA to undertake the work in a shorter time scale, will be reduced appeal rights and increased administrative responsibilities on ratepayers says Colliers.
The VOA has given the government a wish list which includes the annual provision of information whereby the ratepayer will have to provide not only confirmation of physical details on an annual basis but updates on rent and lease information as well as trading information even when there have been no changes. According to John Webber, Head of Business Rates at Colliers, “This will pass a significant bureaucratic burden onto the ratepayer, which we believe is neither needed nor healthy for UK plc.”
Webber continued, “To put into context, currently out of approximately 1.9 million ratepayers, 700,000 pay no business rates. These changes will therefore result in these 700,000 ratepayers being required to send one or more pieces of information annually to the VOA, involving them in a bureaucratic exercise where their information is unlikely to be used. This will have no effect on the amount of rates collected. At a time when business is supposedly being relieved of red tape in a post Brexit world, the government seems to be proposing the opposite!”
Colliers is also worried that
- the VOA will be spending too much time wading through this information instead of getting the values correct or dealing with appeals in a timely way.
- sanctions and penalties that will be imposed should ratepayers either not return the information or not return it within what appears to be a ridiculously short period of time.
- a late return of any annual request or none-returned physical update information could result in a technical knockout of any appeal- which Colliers feel the VOA is fond of doing.
- little indication from the government to impose similar time deadlines on the VOA even though they are receiving half a billion pounds of additional funding.
- Lack of transparency at the VOA- timing to implement any transparency is vague and extends well into the 2026 rating list and beyond. Colliers believe that the VOA should be far more transparent starting now at the beginning of the 2023 rating list.
2 Improvement relief
The government set out how it will introduce improvement relief targeted at qualifying works which ratepayers carry out to their premises. Colliers believes this is a step in the right direction, but has doubts about the extent of this relief, particularly as developers and landlords are exempted from it. It does not appear as generous as the scheme already in place in Scotland and says Webber, “Depending on how it is implemented, may have little consequence to ratepayers in their decision-making process.”
3 Support for investment in green plant and machinery
The government also set out several green measures to exempt plant and machinery used in on-site renewable energy generation and electricity storage. Colliers think the government should go further in a more wholesale review of the plant and machinery regulations to make sure that developers, landlords and occupiers carry out investment in all new technology that makes buildings more sustainable, but without carrying an additional tax burden for a period of at least 10 years.
4 Other administrative changes
The government has also proposed several relatively minor administrative changes which on the face of it seem of little consequence. How the central list is administered may be of little consequence unless the government decides to make it far easier for the VOA to change the valuation approach to certain hereditaments and create a back doorway of raising more revenue.
The government has also proposed simplifying the system which administers discretionary relief by local authorities. This relief can be a vital tool for local authorities to help specific businesses who may be experiencing hardship and underusing their premises. On the face of it these reforms appear sensible- however in practice Colliers believes the continued underfunding of local authorities across the country means greater control by local authorities is meaningless.
As John Webber concluded, “Overall, the government’s failure to deliver the much-needed fundamental business rates reform last Autumn and replacing it with this consultation is desperately disappointing. We urge all interested parties to let the government know this and to respond before the consultation ends next week or they could find themselves snarled up with extra expense and administration.”