Government consults on more frequent business rate reviews

Business premises could be revalued for rating every three years instead of every five under Government proposals.

HM Treasury has launched a consultation on changing the frequency of revaluations in the face of complaints from businesses with physical premises that the rating system puts them at a financial disadvantage against online retailers. The consultation is part of the Fundamental Review of Business Rates, which will conclude in the autumn.

Treasury financial secretary Jesse Norman said: “Proposals set out in this consultation would mean that valuations more quickly reflect how the economy is performing, making the business rates system more accurate and responsive, while balancing the burden for ratepayers.”

Five-yearly revaluations were introduced by the Local Government Finance Act 1988. A call for evidence in July 2020 that formed part pf the fundamental review found more frequent revaluations were a priority for respondents.

Mr Norman said this change would ensure that ratepayers saw their valuations updated faster, allowing changes in economic conditions to feed through more rapidly into businesses’ liabilities.

The Treasury said as long-term changes in the economy continued, accelerated by the aftermath of the Covid-19 crisis, “this would ensure that the business rates system is more agile and responsive to change”.

More frequent revaluations would also see a fairer redistribution of the tax burden according to the relative value of businesses.

It said though that the change would burden the Valuation Office Agency (VOA), which would have to conduct a full revaluation of England’s non-domestic property stock – and clear all checks and challenges – in a shorter period.

The VOA has typically delivered a full revaluation cycle in to 6-7 years rather than five and the Treasury admitted “all else being equal, compressing the same workload into a three-year window would risk the deliverability and quality of revaluation and appeals work.

“This could mean ratepayers receiving less accurate bills, and place additional pressure on the check, challenge, appeal system resulting in delays.”
Many respondents had suggested increasing the VOA’s funding but the Treasury said this would not work as the VOA’s workload was uneven across the valuation cycle and a three-year system would produce even sharper peaks and troughs.

“Simply increasing surveyor headcount would not address this imbalance, and the availability of qualified surveyors constrains the VOA’s ability to meet the significant peaks in work that would result,” it said.

Policy changes would be needed to improve the accuracy of valuations, by providing for a more regular flow of information to the VOA, supporting more accurate and timely valuations and bringing business rates more in line with other taxes.

The VOA should also become able to clear challenges in thematic or localised batches rather than individually.

A Local Government Association spokesperson said: “We are pleased the Government has set out proposals we have been calling for in its Business Rates Revaluations Consultation. This includes the requirement for ratepayers to notify changes to the VOA and councils, and doing away with the check stage for appeals as well as a shorter limit for challenges.

“We will look forward to responding to the consultation in due course.”

Helen Dickinson, chief executive of the British Retail Consortium, said: “It is great that Government have heeded our call for more frequent revaluations.

“This should be the first step towards making the business rates system fairer and more reflective of current economic conditions.

“As retail emerges from the pandemic, a return to ‘business rates-as-usual’ could derail the industry’s recovery, with unnecessary shop closures and job losses the result.”

Ms Dickinson also called on the Government to reduce the overall rates burden on businesses.

Mark Smulian