The effects of the COVID pandemic have been some of the most extreme felt by the economy of this country, possibly since the financial crisis, or perhaps more realistically, since the Second World War. Whilst some businesses have ridden out the storm, or have even thrived, many have been catastrophically affected. More than 300,000 chose to challenge their rateable values, seeking reductions in their assessments to reflect the effects of the pandemic on their businesses and on property values. The government introduced a number of rates reliefs, which we have reported on in these news pages, but was still faced with “material change of circumstances” (MCC) appeals against rateable values from businesses which had been subject to reliefs, and many which had not.

On 25 March this year the Government announced that it proposed to legislate to rule out COVID-19 related MCC appeals. Initially this was done by a Statutory Instrument (The Valuation for Rating (Coronavirus) (England) Regulations 2021) which came into effect on 25 March, but could have no retrospective effect, and therefore could not affect the hundreds of thousands of “checks” and “challenges” that had already been made against rateable values between the first “lockdown” restrictions in March 2020 and March 2021.

In order to achieve its aim of retrospectively ruling out the COVID-19 related MCC appeals, the Government introduced the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021, which has now become law.

The effect of the Act is to require that matters attributable to coronavirus that may not be taken account of in making certain determinations (include the setting of rateable values) for the purposes of non-domestic rating. The “determinations” that are subject to the Act are any determination as to whether or not a property should be included in a rating list (for any rating list), and a determination as to the rateable value of a hereditament for the purposes of maintaining 2017 Rating Lists. This means that deciding whether or not a property should be rateable will always have to exclude the impact of COVID-19, and deciding what the rateable value of a property should be in the 2017 rating lists will, generally (subject to the exceptions set out below) will also have to exclude the impact of COVID-19. Determining rateable values for the next rating list, to come into force on 1 April 2023, can take account of the effects of COVID on property values, but most appeals in the current (2017) rating lists will not be able to do so.

The Act does provide a limited number of exceptions to this rule of excluding the effects of COVID-19. The two principal exceptions are, firstly, determinations as to whether a property is domestic or not, and secondly, determinations as to whether a property is exempt from non-domestic rating or not, for example as agricultural land or buildings. In such cases, even if the alleged change (for example from non-domestic use to domestic use, is as a result of the COVID-19 pandemic, that is something that can be taken into account.

With these exceptions, the Act provides (subsection 4) that, where making a relevant determination, “no account is to be taken of any matter (whether arising before or after the passing of this Act) that is directly or indirectly attributable to coronavirus”. The provision applies retrospectively, and therefore brings within its scope checks and challenges to rateable value made before the passing of the Act. It also applies to things that are “directly or indirectly” attributable to coronavirus; this presumably being aimed at giving a wide basis of exclusion – for example from the use of the words “attributable to”, rather than, say, “caused by”.

Despite this wide-ranging wording, that Act makes clear (subsection 5) that the “coronavirus exclusion” does not apply when considering: the physical state of the hereditament, including whether that state affects the mode or category of occupation; the quantity of minerals extracted from the hereditament; or the quantity of refuse deposited on the hereditament. These important exclusions mean that, for example, if physical changes were made to a hereditament to change its use from office to warehouse, those changes would be taken into account even if they were ones that were directly or indirectly attributable to coronavirus, such as a lack of demand for offices.

The Act goes on to specify (subsection 6) that “matters attributable to coronavirus” include, but are not limited to: anything done with a view to complying with legislation, whether that legislation relates to coronavirus or not; and anything done in response to advice or guidance relating to coronavirus.

Subsection 7 explicitly makes clear that the Act has retrospective, current, and prospective effect, and subsection 8 defines coronavirus as “severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2)”. Finally, subsection 9 revokes the Valuation for Rating (Coronavirus) (England) Regulations 2021.

Looking firstly at the policy justification for the Act, which is that “market-wide economic changes to property values, such as from COVID-19, can only be properly considered at general rates revaluations”, this simply does not stand up to scrutiny. It is abundantly clear that the effects of COVID-19 are not “market-wide economic” ones, they have been changes to the way in which businesses use, and have been able to use, their property. These are not “market-wide” changes either; to show this one simply has to compare the effects of the pandemic on the use of, say, a distribution warehouse, and a serviced office. Ratepayers will be entitled to feel that the policy priority is more one of revenue protection than anything else.

On a practical level, the legislation is very broadly worded, which should mean that it is capable of securing the effect Government says it desires, but it nevertheless involves valuing on the basis of counterfactual assumptions – ignoring the effects of the pandemic. Valuations on a counterfactual basis have been behind a lot of recent litigation in the field of business rates, think (amongst others) of the state of repair assumption, or of completion notice legislation, and there is no reason to suppose that these latest counterfactual assumptions will be any different in that respect.