The current “unfair, punitive and unworkable business rating system” must be reformed in the next Budget according to Colliers International, the global commercial real estate agency and consultancy but a move towards self-assessment, where ratepayers need to make the correct assessment themselves or face significant penalties “…is not the only solution and could add further to the burden of red tape on businesses.”
Having sat on a Consultation Paper ‘Frequency of Revaluations’ for 18 months, the Government has said it will report on its most favoured options in next week’s Budget. Whilst Colliers would welcome a move to more frequent valuations, business rates experts are concerned the Government might also introduce a self-assessment option for business rates akin to corporation tax. This would turn on its head the 400-year old business rates system and place the burden on the rate payer.
As John Webber, Head of Business Rating at Colliers International said, “The official line is that the Government is looking at all the options. However, sources have confirmed that the Big Four accountancy firms have been consulted on how to make self-assessment work and what lessons could be learned from personal taxation. I understand the Government favours self-assessment not only as a way of delivering more frequent revaluations, but also as a quick-fire method of cutting costs at the VOA which is sitting on a backlog of over 200,000 business rates appeals.”
The calamitous implementation of the new Check, Challenge and Appeal system (CCA) is seen as laying the foundations for self – assessment.
Webber voices several concerns about a straight move to self-assessment which he believes will give:
- More burden and red tape for small businesses who are unlikely to have in house business rates team
- Unrepresented ratepayers again at the mercy of unscrupulous and professional rating advisors who could potentially do even more damage than they do in the current system.
- The range and complexity of non–domestic properties will mean the amount of time spent checking self-assessment returns would potentially be even more time consuming and litigious than even the existing system.
According to Webber, “Any move to “self-assessment” could cause “more harm than gain” if the underlying issues in the system are not resolved and potentially could be disastrous. The current rating system has a proven track record and it is only recently that it has been brought into disrepute due to increased charges, the increase in the revaluation cycle from 5 to 7 years, unprofessional agents and an unworkable appeals system. It is these factors we really need to reform.”
In representations to Government, Colliers instead has made the following wish list for the 2017 November Budget in terms of Business Rates:
· A move to more frequent valuations, three yearly, at least by 2022, and even annually by 2025 should be introduced. Colliers believes this would reduce the number of appeals, provide a certainty of income for Billing Authorities and prevent the massive increases or decreases in Rateable Value caused by five or even seven-year revaluations, where some businesses saw rate bill rises of over 100%, making it difficult to plan ahead. More frequent valuations would also mean the transitional relief schemes are not necessary, making the system far less complicated for ratepayers.
· Increase funding for the Government’s Valuation Office Agency (VOA) in order to deal with the existing appeals’ backlog of over 200,000 appeals. The current policy of reducing numbers in the VOA and introducing the Check Challenge Appeal System has been disastrous, with many businesses finding it impossible to navigate around the new system. A FOI request made by Colliers to the VOA concerning businesses using the new appeals system found nearly 90% of the 847 respondents were dissatisfied or very dissatisfied with the new system, calling for greater simplicity clarity, speed and guidance in using it.
· Release the VOA from pressures exerted by local councils and HM Treasury, enabling them to carry out their statutory jobs and create a true culture of independence of thought, improving morale and staff retention.
· Introduce a register of professional rating advisors similar to a system operated in the financial services industry by the FCA. This would reduce or even remove the cowboy element that created the amount of unsubstantiated appeals, and also prevents the ratepayer from being put at a disadvantage.
· Root and branch reform of current business rates exemptions and reliefs.
· Use CPI instead of RPI inflation figures when calculating the annual Uniform Business Rate. The 3.9% RPI rise announced in October will mean an additional £1 billion on the rates bill next year. The multiplier at £0.497 is the equivalent of a 50% tax rate.
· Greater levels of transparency. The VOA should publish and make available publicly information on which they have based their valuations at the beginning of the Rating List. The level of charge ratepayers are currently paying at nearly 50% should entitle them to also see all of the information on how values on all non-domestic properties have been arrived at – most appeals are fishing exercises created by a lack of information- a problem easily solved with a culture of openness.
Webber continued: “Many businesses have been hammered in the recent business rates revaluation, and with the uncertainty caused by Brexit, the additional costs of the NLW and interest rates looking likely to rise, it's a tricky time for many. The Government really must show some support to businesses and alleviate the business rate burden. We believe these reforms would enable the existing system to be more efficient, simpler and give greater certainty to stakeholders. Action needs to be taken, but we don’t feel self-assessment unless accompanied by a culture change is the answer. Failing this we believe hard pressed smaller businesses, in particular will continue to suffer.”