Conclusion
Undeniably, the 2023 rating revaluation will result in a significant rebalancing of the tax take. It is certainly good news that despite the impact of Covid-19, our research suggests that the Uniform Business Rate is not going to significantly increase. A steep increase would be detrimental to everyone.
What is clear is that the 2023 rating revaluation cannot come fast enough for the traditional retail sector. Increasingly over the last 6 years (since the 2015 valuation date), the tax has changed from simply being a challenging cost across the retail sector to a significant burden, which in so many cases has become increasingly disproportionate against a backdrop of diminishing margins.
The crisis on the High Street is not because of business rates. Fundamental change in consumer behaviour driven through growth in on-line sales is of course the driver. The problem with business rates is how slow the system can be to respond to these challenges, so exacerbating the financial struggles across the sector. It is not just an occupier problem. Landlords and developers are cautious in the sector, delaying much needed investment to help re-purpose and re-invigorate the traditional retail experience across many retail locations up and down the country.
The Government’s decision to delay the 2021 revaluation to 2023, was in our mind a wrong decision since it further delayed that correction. The Government’s commitment to move to 3- yearly revaluations from 2023 to allow the tax to remain fair and relevant is an important move. However, in making this move the Government must also commit to remove any form of downwards transition from 2023.
Retailers and other sectors devastated by Covid-19 must receive the full benefit of their business rates reduction from day 1 of the new revaluation. What is the point of more regular revaluations if downwards transition prevents the true savings from being realised?
Even with a 2023 revaluation, traditional retail will continue to pay the highest proportion of business rates to total overheads. The Government has to put a break on the tax and we continue to advocate a reduction in the UBR through freezing business rates at 45p and tying in future business rates growth to rental growth, rather than inflation.
We fear post Covid-19 that the Government does not have the funds to make this change and we have further fears that they will add additional retail costs through the imposition of an online sales tax, which will only damage the retail sector further.
The key is to continue to lobby government to ensure that reforms don’t further damage a tax which has justifiably been challenged as out of date and out of touch with business. Much more needs to be done over the coming months. A great opportunity must not be missed to deliver a modern business rates system which works for all stakeholders.
What is clear is that the 2023 rating revaluation cannot come fast enough for the traditional retail sector.
When the Government uses the word "reform" it implies change for the sake of the common good. We continue to have real concerns that the direction of travel, as confirmed by the post Budget report following the much-awaited Business Rates Review, is that the focus is still on preserving Government revenues and reducing the work of the Valuation Office Agency (again to save costs to the Exchequer). The Government must be mindful that businesses need to be listened to.
On the positive side, the following measures and initiatives have been put in place following the Autumn Budget & Spending Review:
- The business rates multiplier has been frozen again for the 2022/23 rate year, keeping the multipliers at 49.9p and 51.2p (England).
- A new temporary business rates relief scheme for eligible retail, hospitality and leisure (RHL) properties for 2022-23. Eligible properties will receive 50% relief, up to a £110,000 per business cap. This will therefore provide little help to struggling large businesses with multiple RHL properties. We await the guidance to really assess the eligibility and benefit of this scheme.
- A 100% improvement relief for business rates scheme is planned. This will provide 12 months relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The Government will consult on how best to implement this relief, which will take effect in 2023 and be reviewed in 2028.
- There is a plan to introduce from 1 April 2023 until 31 March 2035 targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible heat networks, to support the decarbonisation of non-domestic buildings .
- It has been confirmed that revaluations will take place every 3 years instead of every 5 years, starting in 2023. The Government will also review whether the gap between assessing levels of value and the date a list goes live can be shortened, but this will not be to until at least 2026. Annual revaluations will be reviewed in the future; however this is not imminent.
- It has been confirmed that additional funding of £0.5bn will be given to the Valuation Office Agency to support the delivery of the new revaluation cycle.
- Finally, the Government will extend transitional relief for small and medium-sized businesses, and the supporting small business scheme, for 1 year (2022-23). This will restrict bill increases to 15% for small properties (up to a rateable value of £20,000 or £28,000 in Greater London) and 25% for medium properties (up to a rateable value of £100,000), subject to subsidy control limits.