Business rates reform will cost sector even more

By Gary Lloyd

- Last updated on GMT

Non-Domestic Rates bill: the workload passed to ratepayers will increase and counter the pledge made by Tory leaders says Colliers (credit: getty/andresr)
Non-Domestic Rates bill: the workload passed to ratepayers will increase and counter the pledge made by Tory leaders says Colliers (credit: getty/andresr)

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The promised reform of business rates will not cut costs for the sector but will, conversely, include a 7.1% increase in rateable values, according to property expert Colliers.

Despite the pledge to help businesses in the Conservative party’s manifesto, the retail sector will still be paying almost a quarter of all businesses’ rates tax when the gross value-added from retail to the economy is less than 10%.

Colliers also stated unless the Government does something about rogue surveyors, the sector will see a rise in “cowboy ratings advisers” taking advantage of confused businesses.

The accusations come a week after the new Non-Domestic Rates bill was laid before parliament in the House of Commons and is expected to receive a second reading on Monday 24 April.

The bill came about following the 2020 Business Rates Review and stated there will be delivery of more frequent revaluations, shorter revaluation cycle, more accurate rating lists and the disclosure of more information to ratepayers about their business rates valuations.

It also vowed to take measures to support decarbonisation and investment, and a new ‘improvement relief’ from April 2024 would mean ratepayers will not see an increase in their rates bill from qualifying improvements made to their property for 12 months.

Positive on the surface

There was also an announcement of a three-year ‘transitional relief scheme’ and the removal of downwards transition, plus a ‘digitalising business rates project’ to modernise the business rates system and improvements to the administration of business rates, including replacing RPI with CPI as the measure of inflation used in the annual indexation of the multiplier.

Colliers head of business rates John Webber said the changes looks positive on the surface and particularly noted the pledge to have more frequent revaluations and the removal of downwards transition.

However, he would prefer annual revaluations if rates bills are to be a more accurate reflection of rental levels and although the relief for low carbon heat networks and the new improvement relief scheme are promising, limiting the relief for only 12 months is unlikely to encourage long-term investment.

He added: “On closer inspection, Colliers has large concerns about the administrative burden put on ratepayers with the new requirements for the annual provision of information and the duty to notify whereby businesses will not only need to confirm the physical details of the property on an annual basis but also provide updates on rents and lease information as well as trading information, even where there have been no changes notifications.”

He argued failure to do this could result in serious fines or even imprisonment, adding an additional 700,000 businesses that currently pay no business rates due to reliefs – many of these smaller retailers and hospitality companies – will have to send information to the VOA in a bureaucratic exercise that won’t result in any increase in the business rates tax.

He said the bill represents a complete change in terms of the obligations on the VOA (Valuation Office Agency) with obligations now being placed on the ratepayer.

Green light to cowboys

Webber added this increasing burden will put smaller retail and hospitality businesses even more into the hands of rogue rating advisers who will claim to advise them through the paperwork.  

Webber said: “Unless the Government does something about the issue of rogue surveyors, these new demands will give a green light to cowboy rating advisers taking advantage of businesses now even more unsure of how to negotiate the complex business rates system.

“Meanwhile, nothing has been said about tackling the real issue with business rates – that it is overburdensome and just too high a tax to be sustainable for businesses – it’s a plus-50p in the pound tax.

“Far from cutting business rates, as promised in the Conservative manifesto, this year’s list will show a general 7.1% increase in rateable value. The retail sector alone will still be providing £6.7bn in business rates in 2023-24, which is nearly a quarter of the overall business rates tax take, despite the fact that the gross value-added from retail to the economy is less than 10%.

“Unless the Government reduces the multiplier to levels businesses can afford, say, 34p in the pound, none of the above changes will make a significant improvement for businesses in these sectors.”

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