We fear businesses’ ability to appeal higher and higher rate bills will be curtailed if Government proposals come into force.
The Government’s latest proposals on business rates (Government Consultation Paper on More Frequent Revaluations) will create more difficulties for businesses appealing their business rates than benefits, according to rating experts at Colliers.
Please watch our short video explaining the flaws of the newly proposed system below.
Colliers is responding to the Government consultation launched at the end of June which requires responses by 24 August 2021, in which the Government stated its belief that three yearly Revaluations (Revals) will provide more accurate valuations and greater transparency about the make-up of valuations, enabling business rates liabilities to more closely reflect current rents and economic conditions.
While Colliers supports the move to three-yearly valuations, (although would prefer annual revaluations) it is concerned that the Government is not prioritising increasing the resources at the VOA to achieve this aim, resulting in a system, according to Colliers, which will inevitably put even more burden on ratepaying businesses.
The consultation paper is asking for responses and comments 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 and 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 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 is also proposing 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. This is expected to be 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 i.e. within two years and nine months (the current Check and Challenge process alone can take up to two years and six months).
- Landlords could not submit an appeal where they are not the rateable occupier.
- The ratepayer can apply for a fuller analysis of rental evidence used, but this must be prior to the Challenge being submitted i.e. within the three months. This may also be subject to a fee.
According to John Webber, Head of Business Rates at Colliers, the proposals would result in a much more onerous and expensive way for businesses to appeal their business rates. In its response to the consultation, Colliers has highlighted the following flaws in the proposed system:
- Duty to Notify. This is a significant burden on ratepayers as it will now involve an annual confirmation return. This is effectively an annual check by ratepayers - even those who may benefit from reliefs and don’t pay business rates - 600,000 businesses currently - increasing the paperwork and administration burden.
- Mandatory Provision of Lease Information. Again, an annual return to include side letters and arrangements agreed with landlords. This is required by the VOA even though they already have access to this through land registry and other sources. There may also be multiple rental returns required for each ratepayer based on frequent events being concluded throughout the year.
- Restrictions on Appeal timescales. The Government has already announced that the draft list will be published 3 months before it becomes live and not the usual 6 months. This proposal then suggests a 3-month window to appeal. This leaves little time to review valuations and submit Challenges upon receipt of the draft list values.
- Fees for a Challenge with refunds upon success. This could cause cash flow issues and will reduce access to justice (currently there are no fees payable until the final stage of CCA).
- Although the 3 yearly cycle is a positive move, compared to what we have now (where rateable values are still based on rents in 2015), the VOA has maintained that it needs a 2-year gap between the Antecedent Valuation date (AVD), when values are assessed and when the list becomes live. Colliers believes the gap should be shortened to 12 months to give a truer reflection of the market.
- Landlords restricted from submitting challenges. Although not of major concern to many, a lot of landlords take a proactive approach to the rates liability of their tenants. To remove their involvement in the process seems unnecessary as well as undemocratic.
- The death of MCC’s. Set against the background of the Government legislating to outlaw COVID-19 MCC appeals perhaps it is not surprising that they are suggesting the removal of the ability to appeal on any MCC grounds. While this could be possible in an annual revaluation cycle, to remove it in a 3-yearly cycle is again undemocratic and unjustified.
- Transparency – only proposed in stages – this is not fair to ratepayers and means the VOA will not be transparent until later lists.
- Backlog – the huge backlog of 2017 appeals mean that it is unlikely that these will be cleared prior to the new list and new process being put in place. Colliers are concerned that 2017 appeal rights could be cut off.
- Timescale. Based on experience, Colliers also think that 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.
John Webber comments, “The Government introduced the current CCA 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 mess.”
“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. If the proposals go ahead as in current form, the VOA will think it is Christmas.”
“It’s interesting the proposals have been rushed out at the start of the Summer holidays as businesses struggle with trying to return to normality and the pingdemic of staff following the COVID-19 lockdown. However, despite the inconvenience, we urge all businesses to make representation to this consultation by 24 August – or their ability to appeal higher and higher rate bills will be severely curtailed.”