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It seems that we are now to get two budgets in years when there is a general election. In 2010 the coalition government introduced a second “Emergency Budget” following the general election and this year, following its general election victory, the Conservative government has introduced a second “Stability Budget”. Whilst the Chancellor’s speech itself contained nothing new on business rates, there were three announcements made on the day of the second budget that are likely to have implications for the business rates system.
Update on the Business Rates Administration Review
The Department of Communities and Local Government (DCLG) published an update on progress with this review, which is one we have mentioned in previous news pages. The update included a summary of responses to the review’s interim findings and confirmation of next steps in three areas – appeals, information sharing, and billing and collection.
The business rates appeals system is to be reformed into a three-stage process of “check”, “challenge” and “appeal”. The check stage will involve ratepayers in validating and agreeing facts. The challenge stage will allow ratepayers to challenge a valuation made by the Valuation Officer (VO) by putting forward an alternative valuation and supporting evidence. The challenge will be concluded by a decision notice issued by the VO either confirming his original figure or putting forward some revised valuation. The appeal stage will be open to ratepayers who are unhappy with the VO’s decision notice and will allow an appeal to the Valuation Tribunal for England, perhaps requiring an appeal fee.
These changes will be enabled by the Enterprise Bill, to be published in October, and will be given effect by regulations enabled under the bill and which will come into effect with the next business rates revaluation in 2017.
Whilst some elements of these changes are welcome ones – particularly ensuring that not all unresolved challenges automatically become appeals to the Valuation Tribunal, whether or not they need to – there are others that less welcome and appear to make the appeals playing field an even less level one than it presently is. It would be better and fairer to require the VO to publish the information it has used in preparing valuations rather than requiring ratepayers to produce evidence as to why those valuations are wrong.
The update also promised that the Enterprise Bill will “provide a gateway which will allow the VO to share information with local government to improve the system for both ratepayers and local government”. There are no clear details of what information is to be shared. What would be very disappointing would be to see legislation that allowed the VO to share information with local government, but did not also allow the VO to share information with ratepayers – especially, as we have suggested above, the information that the VO has used in preparing its valuations.
Finally, the update promised to continue work with local authorities and ratepayer representatives to standardise rates bills and to investigate digital channels for billing. This is a welcome move; there seems no real reason why rates bills should not adopt a standard format and use standardised information. E-billing would be more of a challenge, principally that of avoiding developing 350 different e-billing systems, one for each billing authority!
Business Rates Avoidance
DCLG and HM Treasury have published a summary of responses to the consultation on Business Rates Avoidance which is a subject we have covered in earlier news pages. There were over 140 responses to the consultation, the majority from local authorities.
As well as publishing the summary of responses DCLG and HMT conclude that “the evidence of scale confirms to the government that business rates avoidance must be addressed”. The announcement makes clear that anti-avoidance measures will be introduced and that this will be coordinated with the business rates review that is due to report for budget 2016. The proposed anti-avoidance measures are not described, but it is suggested that this will “complement the ongoing commitment to give local authorities greater power over their budgets”.
This consultation appeared to put the cart before the horse from the very beginning when its terms of reference included the statement that it was to “find ways to tackle business rates avoidance”. The summary of responses suggests that this determination is in no way diminished. There appears to be no recognition of the damaging effects that this country’s punitive empty rates regime has on regeneration and redevelopment, the emphasis is only on increasing revenue.
The idea of local authorities being granted anti-avoidance powers is a concerning one. The business rates system is already over-complex and its administration inconsistent. Such a change would increase complexity and the scope for more local variation of interpretation. The burden of empty property rates is such that, whatever anti-avoidance measures are introduced, there will always be ratepayers keen to find ways over, under, round, or through them.
Local Newspapers – Business Rates Relief
Finally, the government has launched a consultation on potential business rates relief for local newspapers. This fulfils a Conservative manifesto pledge to investigate additional possible rates relief for properties occupied by local newspapers. The consultation seeks responses by 30 September 2015.
We cannot help but wonder how this sits with, firstly, the business rates review which is a ongoing review of reliefs and exemptions, and secondly, with the government’s own statement that the business rates regime is overly complex and is difficult for ratepayers to understand. If the tax were set at a more reasonable level the whole issue of exemptions and reliefs would be much less critical.
