_Treasury Committee finds faults with Business Rates System and considers Valuation Office Complacent

The recent publication of The Treasury Select Committee’s review of the Impact of Business Rates on Business provides no surprises for those in the industry. The findings set out in stark terms the serious faults that have been allowed to develop in the system which have undermined it. 

The fact is that unlike other taxes it has been allowed to grow by 40% above the rate of inflation since 1990 generating an additional £ 12.28 billion from the total £ 27.3 billion collected annually. The Committee have directly asked the Government if this is deliberate policy and why has it been done given the damage it is doing to businesses and investment in this country. As a result the UK now has one of the highest property taxes in the OECD as a proportion of GDP.

The Government could start to address this now by freezing the increase in rates for next year. With effect from the 1st April 2018 the government switched the measurement used for increasing the multiplier from RPI to CPI, however, The Draft Local Government Finance Act (Non-Domestic Rating Multipliers) (England) Order 2019 was laid before Parliament on Monday 4th November 2019. Within this order the Government has prescribed an increase effective from the 1st April 2020, that is below the Sept 2019 CPI of 1.7%, although this appears beneficial to Ratepayers, we believe this will still have a considerable impact on the amount of ‘Rates Payable’. 

As such Knight Frank’s estimate that the  relevant ‘Multiplier’ for the 2020-21 Rating Year for England Scotland and Wales will be;

England:

Rateable Value <51,000 - Occupied – 0.499p

Rateable Value 2,900> Unoccupied – RV 51,000 > – Occupied - 0.512p

England, Greater London:

Rateable Value <51,000 – Occupied – 0.499p

Rateable Value 2,900> – Unoccupied, RV 51,000 > – Occupied – 0.512p

Rateable Value 70,000 > – Unoccupied and Occupied – 0.532p

*For any assessment located within the ‘City of London’, a supplement of 0.006p in every pound will be applied. 

Scotland:

Rateable Value <51,000 – 0.499p

Rateable Value 51,000> – 0.525p

Wales:

All assessments – 0.535p

The Committee are equally incredulous on the myriad of ever growing reliefs and exemptions which they state can only indicate “a broken system”. They criticise the Ministry for Housing Communities and Local Government (MHCLG ) for the lack of any guidance to Local Authorities or businesses on how these reliefs & exemptions should be applied. To attempt to fill this vacuum for businesses we have for the last decade continue to publish our popular Knight Frank Business Rates Facts and Figures Guide 2019- 2020.

The Committee were particularly critical of the VOA introducing a new rates appeal system which they considered “unacceptable” as it created so many difficulties for ratepayers and has clearly eroded public confidence. As with the rest of the industry it failed to understand why the VOA would recklessly introduce a system with multiple faults that it knew existed before it went live. It remains correctly of the view, despite the VOA reassurances, that the system does not work for Businesses with multiple properties.  We welcome the Committees view that at the very least the time lines for the Check Challenge process should be reduced from two and a half years to six months for a Check and six months for a Challenge.

In order to address the faults laid bare by the Committee we call upon MHCLG to finally acknowledge these problems and issue legislation which extends the rights of Businesses to appeal their rates through CCA by a further year after the list closes in 2021. 

To ensure that your Rates liability is correct, please contact our Business Rates Team who will be able to advise on all matters on 0207 861 1247 or email the team.