What Government needs to do
In September 2020, Avison Young in collaboration with the CBI published a joint response to the ‘Call for Evidence’ from HM Treasury regarding the fundamental reform of business rates. On 27th October 2021, the Government published a Final Report in connection with the Fundamental Review, that sets out its conclusions along with plans for some additional consultations, notably on the next Transitional Relief scheme for 2023 and an Online Sales Tax.
We continue to call for Government to do the following at the 2023 revaluation:
1
Reduce the total gross receipts from business rates. We calculate that based on our estimated English UBR of 52.5p and the changes in the rateable value pool, the total gross receipts will equate to £34.98 bn. We propose this is reset at £30 bn, through reducing the UBR to 45p.
2
No subsequent inflationary increase in business rates over the 3 years of the 2023 revaluation.
3
Restrict any future growth in Government revenue through business rates to subsequent revaluations only, the earliest increase being from April 2026.
4
Abolish downwards transition, so that all businesses receive the full benefit from reductions in their rate liability from 1st April 2023. If a similar downwards transition scheme to 2017 is implemented, we estimate this would potentially cost the retail sector almost £4.5 bn, more than halving the benefit they should receive from the 2023 revaluation with no transition.
5
Buildings are responsible for 38% of all emissions and 35% of global energy consumption. Business Rates are a disincentive to sustainable investment. The Government needs to do far more to encourage sustainable investment in commercial properties through targeted business rates relief/exemptions.
These proposals will address the excessive business rate increases over the last 20 years, which have been disproportionate with rental growth and which have been especially penalising to the traditional retail sector.
Our concerns over suggested reforms
Through our discussions with HM Treasury and having reviewed their publication of ‘Frequency of Revaluations’ (July 2021), we have the following concerns which are not in the best interests of the ratepayer, namely:
1
The Government is showing no intention of significantly reducing the gross tax take for business rates. Their position is intensified due to the fiscal restraints of Covid-19.
2
There is significant additional red tape and cost, with an obligation on ratepayers to provide detailed property information to the VOA on an annual basis. Also, the loss of the right to access the appeals system unless ratepayers have complied with the duty to notify and provide mandatory lease information.
There will now be a compliance regime that will include penalties for false information and non-compliance. These requirements will need to be complied with to access VOA rental analysis and the appeal system.
3
There will be completely untenable and severe restrictions on the period to lodge a Challenge to just 3 months. Nonetheless, this will not be brought in until 2026 at the earliest and the plan to charge a fee for this has now been dropped.
4
We had thought that Landlords, although an interested party, would lose their rights to access the Challenge process. The Government has now stated in their Final Review report that this is currently off the table, but will continue to explore alternative options to address some stakeholders concerns about third party rights to challenge against a liability.
5
Following the Government’s intervention into the right to make a Material Change of Circumstances (MCC) challenge to reflect COVID-19, we had significant concerns that the rights to challenge values because of material changes would be further restricted. The Government has now stated that they will not look to add further restrictions to eligibility criteria for MCC claims. The Government will, however, now legislate to clarify that factors arising from legislation, regulations, licensing changes, or guidance are not in the scope for MCCs.