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The Impact of Business Rates on Business

Rob Cohen / 4 Nov, 19

Last week the Treasury Committee published a report entitled ‘Impact of business rates on business’.

In a break from Brexit, 10 MPs undertook an inquiry into the administration of business rates in England and Wales and held five oral evidence sessions earlier this year with interested parties from a cross-sector of business.

The full report extends to 64 pages with a total of 37 conclusions and recommendations. The most significant of these are seen by us to be;

Key Conclusions & Recommendations

– There has been an above-inflation increase in commercial property-based taxation since its introduction in 1990 and this has resulted in the UK having one of the highest property-based taxes in the OECD as a proportion of GDP.

– The number of reliefs that presently exist indicates a broken system and over-complicate an already complex system. HM Treasury should review all business rate reliefs.

– There is a lack of consistency in how each of the 361 billing authorities operates and a single comprehensive guide on how business rate reliefs are operated should be created, to ensure consistency and improve transparency.

– The transitional relief system, that minimises the movements in any particular year that result from changes in valuation, has kept rate bills artificially high over a prolonged period for many businesses. It needs to be redesigned so that, by the end of the rating list’s life, all business rates liabilities represent the period’s rating list value, adjusted for inflation.

– The classes of plant and machinery that are included were last re-defined in 1993 and the way in which businesses operate has changed significantly since then. The Government needs to consider if legislation is required to update this, especially in regards to ensuring that investment in green assets (e.g. solar panels and energy-efficient machinery) is not disincentivised.

– It is unacceptable that there are still appeals outstanding from the 2010 listing, years after the appeals were first raised. The VOA must resolve these appeals as a matter of urgency.

– The current statutory response times in relation to Checks and Challenges are too generous. These presently stand at 12 months and 18 months and no business should have to wait up to two and a half years for their appeal to conclude. The Government should introduce new secondary legislation to shorten these, preferably a maximum of six months each.

– Bringing a new system online in April 2017, with less functionality than its predecessor, has eroded public confidence and there were significant failings with the new system at the outset that should have been addressed. The VOA must make sure that ratepayers with multiple properties are able to use its systems easily and that its systems are not creating unnecessary additional bureaucracy.

– A timetable needs developing in order to migrate business rates onto the ‘Making Tax Digital’ platform. The migration needs to ensure that there is no loss of functionality with the transition and would provide the opportunity to revisit the issue of user authentication and to improve the verification process, two failings in the current system.

– Traditional valuation techniques require revisiting to ensure that they take account of real-life modern business experience. The VOA’s internal guidelines should be reviewed to ensure they take a flexible and responsive approach to valuation.

– There is a lack of consistency between certain similar businesses and the valuations adopted and a review of internal guidelines by the VOA is required to consider if there is scope to improve valuation methodologies so they lead to more consistent outcomes.

– It is clear change is needed to the current business rates system but no alternative systems presented demonstrated that they were a clearly superior alternative.

– The Government should prepare a consultation in time for the next Spring Statement to identify potential alternatives to the current system and form the basis for a subsequent detailed evaluation of viable options.

– The VOA needs to be properly staffed in order to deliver more frequent revaluations, to be able to respond to Checks and Challenges on the current system, to be able to conclude appeals from the legacy systems and to enhance the functionality of the current system. They must perform a detailed analysis of their staffing and skills requirements in time for the next Spending Review.

The conclusions of this report seem well-considered and we accept every one as valid. Let’s hope that the Government takes the recommendations on board and takes action in order to improve the present, woefully poor, system that is unfairly penalising a number of ratepayers through downward transition, a convoluted appeal system and excessively lengthy timescales to resolve issues.

If you’ve got any questions then please get in touch with Rob Cohen on 0113 221 6120 or at rob.cohen@sw.co.uk.

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