The latest consultation sets out how the government intends to implement the measures set out in the business rates review final report published at the end of October 2021. Responses to the consultation need to be in by 22 February. Colliers outline our concerns and urge interested parties to respond as soon as possible.
Whilst we welcome that the government’s commitment to more frequent revaluations from 2023 as it moves to a three-yearly revaluation cycle, the trade-offs, enabling the Valuation Office Agency (VOA) to undertake the work in a shorter time scale, are reduced appeal rights and increased administrative responsibilities on ratepayers.
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. This will pass a significant bureaucratic burden onto the ratepayer, and we believe it is neither needed nor healthy for UK plc.
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!
We are also concerned that the VOA will spend too much time wading through this information instead of getting the values correct or dealing with appeals in a timely way.
The consultation paper also discusses 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. We are concerned a late return of any annual request, or none-returned physical update information, could result in a technical knockout of any appeal- which we know the VOA is fond of. By contrast, there seems little indication from the government to impose similar deadlines on the VOA even though they are receiving half a billion pounds of additional funding.
The consultation paper also sets out how more transparent the VOA will be. However, timing is vague and extends well into the 2026 rating list and beyond. We strongly believe that the VOA should be far more transparent starting now at the beginning of the 2023 rating list.
The government has set out how it will introduce improvement relief targeted at qualifying works which ratepayers carry out to their premises. This is a step in the right direction, but we have some 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 depending on how it is implemented, may have little consequence to ratepayers in their decision-making process.
The government has also set out several green measures to exempt plant and machinery used in on-site renewable energy generation and electricity storage. We 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.
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 the continued underfunding of local authorities across the country means greater control by local authorities is meaningless.
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 their views by responding here before the consultation ends.