The latest government consultation on business rates, launched on 29 June, requires responses by 24 August 2021. On the face of it, things look promising. The government states its wish to move to more frequent valuations given “three-yearly revaluations will provide more accurate valuations and greater transparency, enabling business rates liabilities to reflect current economic conditions more closely”.
We agree. No one wants a repeat of the six- or seven-year rating lists we have all experienced, although ideally, we would prefer annual revaluations. However, we are concerned that the government is not prioritising increasing resources at the Valuation Office Agency to achieve this aim, since this could lead to a system that will inevitably put even more burden on ratepaying businesses.
What’s in store?
The consultation paper has asked for responses on the following matters:
Duty to notify the VOA of changes to the occupier and property characteristics, information which would be shared with the billing authorities. This is expected to include extensions, alterations or demolition, conversions, splits, mergers and change of use.
Mandatory provision of rent and lease information, as well as trade and cost information used for valuations. This would be on an annual basis, aligned with business rates billing, using an online portal and would need to include any side agreements. There is also a requirement to provide lease information following an “event” such as a lease renewal or rent review.
Provision of this information is mandatory for submission of an appeal against a rateable value and there would be penalty fines for providing late or incorrect information.
The government also proposes changes to the current appeals system:
The check stage would be removed (most likely for the 2026 Revaluation) on the basis that this would be covered by the duty to notify.
There may be a fee for submitting a challenge, in addition to the current fee for submitting an appeal, refundable if the challenge is successful.
The draft list is unlikely to be issued prior to 1 January before the revaluation, and all challenges against the new list values would need to be submitted within three months of the start of the list.
A new occupier would be able to submit a challenge within three months of the start date of their interest in the property.
The VOA would have a statutory duty to complete all list appeals by the end of the list, ie within two years and nine months.
Landlords could not submit an appeal where they are not the rateable occupier. n The ratepayer can apply for a fuller analysis of rental evidence used, but this must be prior to the challenge being submitted, ie within the three months. This may also be subject to a fee.
What does this mean in practice?
In our response, we state our belief the proposals above would result in a much more onerous and expensive way for businesses to appeal their business rates.We highlight the following flaws:
Although the three-yearly cycle is a positive move, the VOA maintains it needs a two-year gap between the antecedent valuation date when values are assessed and when the list becomes live. We believe the gap should be shortened to 12 months so rates more closely reflect rents.
The backlog of 2017 appeals mean that it is unlikely that these will be cleared prior to the new list and the new process being put in place. Colliers is concerned that 2017 appeal rights could be cut off.
We think it is unlikely that all challenges will be able to be cleared within three years. The onus is put on the ratepayer to provide all evidence and information, yet the VOA’s statutory response deadline is later than it is in the current list.
The duty to notify is a significant burden on ratepayers, as it will now involve an annual confirmation return – even for those who may benefit from reliefs and don’t pay business rates (600,000 businesses currently), increasing paperwork and administration.
Mandatory provision of lease information is another burden on the ratepayer. This annual return, which includes side letters and arrangements agreed with landlords, is required by the VOA even though they already have access to this information through the Land Registry and other sources. There may also be multiple rental returns required for each ratepayer based on frequent events concluded throughout the year.
The draft list will be published three months before it becomes live, not the usual six. This proposal then suggests a three-month window to appeal. This leaves little time to review valuations and submit challenges on receipt of the draft list values.
Fees for a challenge, with refunds on success, could cause cashflow issues and will reduce access to justice. Currently there are no fees payable until the final stage of check, challenge, appeal.
Transparency – only proposed in stages – is not fair to ratepayers and means the VOA will not be fully transparent until later lists.
Landlords are restricted from submitting challenges. Although not of major concern to many, many landlords, take a proactive approach to the rates liability of their tenants. To remove their involvement in the process seems unnecessary and undemocratic.
The death of material change in circumstance appeals. While this could be possible in an annual revaluation cycle, to remove it in a three-yearly cycle is undemocratic and unjustified.
Share your concerns
The government introduced the current appeal system without proper consultation with the industry and without prior testing. The frustrations with that system are well chronicled. This has all the hallmarks of a similar disaster.
This new system would increase the bar to appeal against unfair rating assessments and thus reduce the number of appeals. The VOA will have no need to inspect properties or maintain the list – that responsibility seems to have passed to every ratepayer in the country. That’s why, despite the tight timing, we are urging all businesses to make representation to this consultation by 24 August – or they may find their ability to appeal ever higher rates bills will be severely curtailed.
The latest government consultation on business rates, launched on 29 June, requires responses by 24 August 2021. On the face of it, things look promising. The government states its wish to move to more frequent valuations given “three-yearly revaluations will provide more accurate valuations and greater transparency, enabling business rates liabilities to reflect current economic conditions more closely”.
We agree. No one wants a repeat of the six- or seven-year rating lists we have all experienced, although ideally, we would prefer annual revaluations. However, we are concerned that the government is not prioritising increasing resources at the Valuation Office Agency to achieve this aim, since this could lead to a system that will inevitably put even more burden on ratepaying businesses.
What’s in store?
The consultation paper has asked for responses on the following matters:
Duty to notify the VOA of changes to the occupier and property characteristics, information which would be shared with the billing authorities. This is expected to include extensions, alterations or demolition, conversions, splits, mergers and change of use.
Mandatory provision of rent and lease information, as well as trade and cost information used for valuations. This would be on an annual basis, aligned with business rates billing, using an online portal and would need to include any side agreements. There is also a requirement to provide lease information following an “event” such as a lease renewal or rent review.
Provision of this information is mandatory for submission of an appeal against a rateable value and there would be penalty fines for providing late or incorrect information.
The government also proposes changes to the current appeals system:
The check stage would be removed (most likely for the 2026 Revaluation) on the basis that this would be covered by the duty to notify.
There may be a fee for submitting a challenge, in addition to the current fee for submitting an appeal, refundable if the challenge is successful.
The draft list is unlikely to be issued prior to 1 January before the revaluation, and all challenges against the new list values would need to be submitted within three months of the start of the list.
A new occupier would be able to submit a challenge within three months of the start date of their interest in the property.
The VOA would have a statutory duty to complete all list appeals by the end of the list, ie within two years and nine months.
Landlords could not submit an appeal where they are not the rateable occupier. n The ratepayer can apply for a fuller analysis of rental evidence used, but this must be prior to the challenge being submitted, ie within the three months. This may also be subject to a fee.
What does this mean in practice?
In our response, we state our belief the proposals above would result in a much more onerous and expensive way for businesses to appeal their business rates.We highlight the following flaws:
Although the three-yearly cycle is a positive move, the VOA maintains it needs a two-year gap between the antecedent valuation date when values are assessed and when the list becomes live. We believe the gap should be shortened to 12 months so rates more closely reflect rents.
The backlog of 2017 appeals mean that it is unlikely that these will be cleared prior to the new list and the new process being put in place. Colliers is concerned that 2017 appeal rights could be cut off.
We think it is unlikely that all challenges will be able to be cleared within three years. The onus is put on the ratepayer to provide all evidence and information, yet the VOA’s statutory response deadline is later than it is in the current list.
The duty to notify is a significant burden on ratepayers, as it will now involve an annual confirmation return – even for those who may benefit from reliefs and don’t pay business rates (600,000 businesses currently), increasing paperwork and administration.
Mandatory provision of lease information is another burden on the ratepayer. This annual return, which includes side letters and arrangements agreed with landlords, is required by the VOA even though they already have access to this information through the Land Registry and other sources. There may also be multiple rental returns required for each ratepayer based on frequent events concluded throughout the year.
The draft list will be published three months before it becomes live, not the usual six. This proposal then suggests a three-month window to appeal. This leaves little time to review valuations and submit challenges on receipt of the draft list values.
Fees for a challenge, with refunds on success, could cause cashflow issues and will reduce access to justice. Currently there are no fees payable until the final stage of check, challenge, appeal.
Transparency – only proposed in stages – is not fair to ratepayers and means the VOA will not be fully transparent until later lists.
Landlords are restricted from submitting challenges. Although not of major concern to many, many landlords, take a proactive approach to the rates liability of their tenants. To remove their involvement in the process seems unnecessary and undemocratic.
The death of material change in circumstance appeals. While this could be possible in an annual revaluation cycle, to remove it in a three-yearly cycle is undemocratic and unjustified.
Share your concerns
The government introduced the current appeal system without proper consultation with the industry and without prior testing. The frustrations with that system are well chronicled. This has all the hallmarks of a similar disaster.
This new system would increase the bar to appeal against unfair rating assessments and thus reduce the number of appeals. The VOA will have no need to inspect properties or maintain the list – that responsibility seems to have passed to every ratepayer in the country. That’s why, despite the tight timing, we are urging all businesses to make representation to this consultation by 24 August – or they may find their ability to appeal ever higher rates bills will be severely curtailed.
Respond to the consultation at: www.gov.uk/government/consultations/hm-treasury-fundamental-review-of-business-rates-call-for-evidence
John Webber is head of business rates at Colliers
