In a joint statement, HM Treasury and the Ministry of Housing, Communities and Local Government have announced that the Government will introduce legislation to “rule out” business rates appeals made seeking reductions in assessment because of the impact of restrictions imposed in response to the COVID-19 pandemic. More than 170,000 businesses are currently seeking reductions in their rating assessments to reflect the “material change of circumstances” (MCC) represented by the pandemic and by the restrictions imposed in response to it. More than 400,000 MCC “checks” have been made since the beginning of the pandemic. These checks represent the first step on the road to appeals against rateable values.
The Chancellor has announced an additional £1.5 billion of support for businesses affected by the pandemic, but has made clear that this support is conditional on legislation being in place to suppress any MCC appeals for the effects of COVID-19 and the associated restrictions, saying that this will provide “more targeted support than the business rates appeals system”.
The Local Government Minister, Robert Jenrick, has made clear that this additional relief will be made available by local authorities in response to applications by ratepayers whose businesses have been affected by COVID-19 “once the legislation relating to MCC provisions has passed and local authorities have set up local relief schemes”. The Minister said that this relief “will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values”. It will be the responsibility of local authorities to assess entitlement to the relief.
The implication from these announcements is that this additional relief will only be available to businesses that do not fall under the existing rate relief schemes, such as the retail, hospitality and leisure rates relief.
The announcement of legislation to suppress MCC appeals relates only to England at present. The additional rates relief fund will trigger an additional £285 million funding to the devolved administrations in Wales, Scotland and Northern Ireland and ratepayers in those countries will be anxious to know whether similar legislation restricting MCC appeals will be introduced there and how the additional funding will be spent.
Ratepayers in England will be entitled to assume that the business rates system is no longer “fit for purpose” if it cannot reflect changes in property values resulting from the pandemic and the restrictions imposed in response. Current rateable values are based on economic circumstances in 2015, and are due to remain in place until 2023. What the Government announcement says to ratepayers is, effectively, “we do not care how what has happened may have affected the value of your property, your property tax (business rates) will continue to be assessed as though there has been no change of circumstances”. This is in respect of a tax which, for larger properties, has a tax rate in excess of 50%. It beggars belief that Government expects, for example, gym operators and restaurants to continue to pay rates through until 2023 on the basis of rateable values set in a different world before the current pandemic. Ratepayers are entitled to despair of a system that is incapable of responding to catastrophic changes such as have been seen in the last year. The tragedy of all this is that it is businesses and employment that will pay the cost.