Radical proposals requiring promt action
Paul Stevens, director of rating at commercial property consultancy Lambert Smith Hampton (LSH) in Bristol and the South West, said that at first it appeared the Chancellor had simply tinkered with rates in his Autumn Statement.
However, his statement included more radical proposals that could prove costly to businesses across the region if they are not addressed as a matter of urgency. He anticipates a flurry of rates appeals in the next few months as firms seek to avoid paying excessive rates for five years.
He said: “Rushed decisions are rarely good decisions and proposals in the Autumn Statement appear likely to have far reaching implications for many rate payers and the economy as a whole.
“It included a number of changes to non-domestic rates. Some can be considered little more than tinkering in an attempt to address more major problems caused by the delay in revaluation from 2015 to 2017.
“But there are also some more radical proposals that may require prompt action if occupiers bills are to be kept to a minimum.”
The Chancellor’s proposals include:
Confirmation that agreement has been reached with the Welsh Government on full devolution of business rates policy. A fully devolved regime will be operational by April 2015. This is likely to increase demands from other regions to be allowed more autonomy over business rates, to either increase revenue or stimulate local business by reducing liabilities.
Small Business Rate Relief is to be extended, so that around 385,000 of the smallest businesses will continue to receive 100% relief from business rates until April 2016, with around a further 190,000 benefiting from tapering relief for this extended period.
Approximately 300,000 shops, pubs, cafes and restaurants with rateable values of less than £50,000 will see the discount in their bills by way of “retail relief” increased from £1,000 to £1,500 in 2015/16.
The annual increase in the non-domestic rate in the pound is again to be capped at 2% for the rate year 2016 rather than following RPI.
Current system no longer fit for purpose
Paul added: “It has been confirmed that the Government will carry out a review of the future structure of business rates and will report its findings by Budget 2016. Consultation has already been undertaken on this and the ratepayers and their representatives have made their feelings well known. There is a widespread view that the current system is no longer fit for purpose and that the delay in revaluation until 2017 has only served to exacerbate the problems.
“It is now most unlikely that any meaningful consideration can be given to the review until after the elections in May 2015. The new Government will then have less than 12 months in which to consider changes, leading to the expectation that announcements will, yet again, be made without their implications being thought through in full.
“The next revaluation in England is due to take place in April 2017. Until full information on how this is to work is confirmed, ratepayers and their advisors are in a state of limbo, uncertain on how to budget for future liabilities or how to best act in order to minimise them.”
Risk of excessive rates bills for five years
In the shorter term the Government has said that it will change the rules so that alterations to rateable values under the current rating list can only be backdated to the period between 1st April 2010 and 1st April 2015 for alterations made before 1st April 2016, and appeals must be made before 1st April 2015.
“They have effectively moved the goal posts for the consideration of appeals. Historically, appeals made at any time up until the end of a rating list could be back dated until the start of that list. This would have allowed ratepayers and their advisors until March 2017 to consider appeals.
“If the alteration of lists/appeal regulations are amended as indicated this will mean that they have only until 31 March 2015 to make appeals. If appeals are not submitted by this date, they risk finding that reductions in assessment cannot be back dated and they will have no option but to pay excessive rates bills for five years.
Expected flurry of appeals to increase pressure on a system already at breaking point
“This is likely to result in a flurry of appeals over the next few months as ratepayers and their agents rush to beat the deadline. The implication is further that any appeals made by the deadline have to be resolved prior to 01 April 2016. This will put yet further pressure on a system, already acknowledged to be at breaking point. It may also result in some poorly considered appeals being made.”
He added: “Whilst this review is welcome, the postponement by the government, in autumn 2012, of the next revaluation for two years means that needed change cannot be delivered before April 2017. It would be much more equitable for businesses around the country for the government to re-assess rates on a more frequent basis, and to remove the imposition of full rates on empty commercial and industrial properties.
“Until we move to a fairer system for all businesses, for many yesterday’s announcement could be too little, too late.”