Bucking the trend of several decades of being below the radar, business rates has emerged as a political football in recent years with some particularly vociferous lobby groups taking the opportunity to bounce it further and further up the political agenda, and justifiably so. With a marginal tax rate approaching 50%, business rates in the UK, as a tax on the occupation of commercial property, are one of the most expensive property taxes in the world, and one of the highest taxes in absolute terms in the UK too.
Business rates is calculated on the basis of a Rateable Value, which is to represent a property’s rental value as at a certain fixed point in time. Yielding over £30 billion for the Exchequer annually, the effect of a revaluation is to merely redistribute the burden more equitably, following changes in the property market since the previous revaluation. The last revaluation took effect from 1st April 2017, referencing values as at 1st April 2015. This updated over 1.8 million valuations last considered in 2008, since when many rental values have actually fallen, and due to transitional phasing, the redistributive effect has meant that the burden is increasing on sections of the economy where rental values have fallen the most.
The 2018 Budget sought to address this point, with an additional allowance granted to smaller firms, with a Rateable Value of £51,000 or less, where business rates will be reduced by a third, for 2 years, from 1 April 2019. This could mean an annual saving of up to £8,000 for the vast majority of independent shops, pubs and restaurants, which fall within this category.
Apart from this headline grabbing initiative, little else has changed, despite the obvious pain felt by hard pressed occupiers, in the retail sector in particular. There is no respite for larger businesses, several of which are having their own well publicised battles with insolvency. The inequity of internet giants paying rates a fraction of those paid by bricks and mortar high street retailers continues, with only vague promises of a new digital services tax, which is at the consultation stage, is likely to be subject to extensive and sustained lobbying from the well-funded internet companies, and will not be brought forward for a number of years.
No announcements have been made in respect of the proposed revaluation that should be taking place on 1 April 2021. At present, the Valuation Office simply isn’t resourced to be able to carry out such a significant exercise, and it may be that this will mean that self-assessment is trialled, where ratepayers are responsible for reporting their own assessed rental value. Following convention, rents from 2 years prior are likely to used, referencing market values on 1st April 2019. Given that this will be just two days after the UK is due to leave the EU, it is feasible that the market will be in a state of flux, and there is every possibility of very little in the way of timely transactions to rely upon at this time. This could prompt a rash of either under or over valuation, and could cause chaos.
In the meantime, ratepayers who want to appeal must persevere with the heavily criticised Check Challenge Appeal system, and seek to deal with the imbalance of an obligation to provide rental evidence to be able to justify reduced rating assessment, where the Valuation Officer has statutory powers to gather evidence on a national basis, whereas the ratepayer has only his own rent to rely on (assuming the property is not freehold), together with any other evidence he may unearth by his own investigation. This seems particularly one sided and not at all fair or equitable. Quite how this meets the obligation for open and transparent Government is open to debate.
Bucking the trend of several decades of being below the radar, business rates has emerged as a political football in recent years with some particularly vociferous lobby groups taking the opportunity to bounce it further and further up the political agenda, and justifiably so. With a marginal tax rate approaching 50%, business rates in the […]