Business rates: Government response on Check, Challenge, Appeal consultation and Budget measures

United Kingdom

On 8 March, the government made two announcements which will affect the business rates regime going forward: DCLG published its response to the consultation on implementation of the Check, Challenge, Appeal procedure; and the Chancellor announced additional measures in his Budget.

Check, Challenge, Appeal – Government response to consultation on statutory implementation

The most significant change made is the removal of the controversial proposals to allow the Valuation Tribunal to decide whether a valuation was “outside the bounds of reasonable professional judgement”. This will be replaced with a duty to consider whether the valuation is a reasonable valuation.

In addition, DCLG confirmed that each Appeal will be subject to a separate fee and that there is no intention, currently, to link the fee charged to the rateable value of properties. This is also reflected in the penalty regime for false information; there is no intention to link the penalty charge to the rateable value of properties at this time. Both policies, on fees and penalty charges, will be subject to review and there will be a general review of the implementation of Check, Challenge, Appeal by April 2018.

The government acknowledged two further concerns raised by businesses in response to the consultation: first, the challenges faced by businesses with multiple properties and multiple clients - the government has stressed that the VOA will engage with businesses to make complex processes for valuation as simple as possible; second, the potential disclosure of sensitive commercial information as a result of the public right to inspect proposals. Despite acknowledging both these concerns, the consultation proposed no further action on these matters at the present time.

Subject to Parliamentary approval, these amended regulations will be implemented as soon as possible before the revaluation on 1 April.

Budget measures

In the Budget yesterday, Philip Hammond asserted the government’s commitment to the business rates revaluation in England. However, he has announced three measures designed to mitigate the impact of rate increases on businesses adversely affected by the revaluation.

First, he proposed that any business coming out of small business rate relief will benefit from an additional cap on their rates liability. Any business which is losing small business rate relief under the revaluation will see the increase in their bill capped at £50 per month for the next year. Any subsequent increases in their liability will be capped at either the transitional relief cap or £50 a month, whichever is higher. This cap will apply for five years.

Secondly, the Chancellor announced a £1,000 discount on business rates bills in 2017 for all pubs with a rateable value of less than £100,000. This discount applies to their revalued bill so some pubs will still see their business rates increase, but by £1,000 less than they would have done before the announcement in the Budget.

Finally, he announced that local authorities would be provided with a £300 million fund to deliver discretionary relief to those businesses particularly adversely, and unfairly, affected by the revaluation. The fund will be allocated to local authorities by a formula, details of which are due to be delivered at an unspecified later date.

The Chancellor once again stated that the revaluation was fiscally neutral. As a result, the £435 million cut in business rates announced today for those who would lose out under the revaluation will be paid for by those who were due to profit from it.

While these propositions may provide relief to some businesses, that relief is temporary. More fundamental structural reform to the business rates system has been delayed indefinitely, despite various ongoing industry campaigns for change. The Chancellor himself acknowledged the flaws in the current valuation system. ‘Bricks-and-mortar’ companies are heavily penalised by the business rates regime, particularly when compared with companies in the digital economy. Equally, there is scope to reform the revaluation process, making it more frequent to avoid the dramatic increases suffered by some companies under the current regime. However, these musings in the Budget will not affect the current revaluation with the 1 April date being imminent.