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The Queen’s Speech to Parliament includes proposals for changes to the business rates system to be contained in legislation during the coming parliament. The reforms will be enacted by both the proposed Enterprise Bill and the proposed Cities and Local Government Devolution Bill. However none of the proposals for these bills appears likely to address the fundamental problems of the business rates system which are a very high level of tax in relation to other corporate taxes and in relation to property taxes in other countries, and an excessively complex business rates system.
The proposed Enterprise Bill will include:
- “introduction of business rates appeals reform, including modifying the Valuation Tribunal powers to consider ratepayer appeals
- allow for the Valuation Office Agency to share information with local government to improve the system for both local government and ratepayers.”
The Government states that one of the main benefits of this Bill will be “improving the business rates system ahead of the 2017 revaluation, including by modernising the appeals system”. This reflects the Conservative manifesto commitment to carry through both the Business Rates Administration Review and the Business Rates Structural Review. The latter review now includes the consultation on “Checking and challenging rateable value” which we have referred to in earlier news items. Any hope that these reviews will address the problem of the very high level of business rates is effectively nullified by the requirement for any outcome of the reviews to be fiscally neutral, that is to say the total amount of tax raised must remain the same.
We will have to wait to see what the Enterprise Bill actually says in order to assess its significance but the very limited detail in the Queen’s Speech suggests that there will be no fundamental reform of the business rates system other, perhaps, than in the area of appeals. The number of business rates appeals has been a consistent concern to Ministers over a number of years and this will only have been exacerbated by the volume of appeals in the first three months of 2015 – itself a result of the recent change to the backdating of appeals, which we commented at the time was likely to result in an avalanche of appeals, and now seems to have done so.
The other piece of new legislation set out in the Queen’s Speech that is likely to affect the business rates regime is the proposed Cities and Local Government Devolution Bill. This, too follows a Conservative manifesto commitment which was to give increased powers to local authorities to retain business rates. The purposes of the proposed Bill include “fulfilling the government’s commitments on devolving powers and budgets to boost local growth in England”. Whilst the proposals are not spelt out in any detail this seems likely to include a power to increase business rates retention (the amount of new business rates income actually retained by a local authority from its area) from 50% to 100% in selected locations. This would accelerate the localism agenda of the previous administration. An increase in local business rates retention is another reason why it is hard to see the Queen’s Speech proposals addressing the real current problems with the business rates system.
Whilst the Queen’s Speech contains only an outline of the Government’s proposed legislation, those who were hoping for real reform of the business rates system are likely to find that outline a disappointing one.
