Rates of change
Continued delays on business rates reform are not good news for firms.
Simple. Transparent. More responsive. These were the government’s three stated aims when it launched its review of business rates in 2014.
Publication of the report was promised by the recent autumn statement but – rather frustratingly for UK plc – it has been pushed back to March 2016. Nonetheless, the results of the review remain keenly anticipated. So what can we expect? Unfortunately for businesses, I don’t think the omens are encouraging.
We know from the party conference season that some form of devolution will be enacted and, while the exact details are to be confirmed the proposals are being presented as a radical move that will lower bills. In reality, local authorities will need to fund any lower business rates they implement themselves and as such it seems fanciful there will be any meaningful cuts.
In addition, the progress through Parliament of the Enterprise Bill has revealed some worrying changes to the rates appeals system. Under the proposals, a raft of new obligations, deadlines and potential fines will shift the burden of evidence firmly onto ratepayers’ shoulders. Not only will the changes bring extra complexity and cost, they represent a potential barrier to justice for smaller firms that lack the resources to meet the new appeals rules.
These changes run contrary to the calls many businesses have been making for some time, in favour of lower and simpler business rates with a more transparent appeals process, and against a return to the days of local authorities setting rates bills. And based on Government announcements to date, it appears it has abandoned its aims to deliver simplicity and transparency.
So, will the review deliver responsiveness to changing economic circumstances?
This question raises the thorny issue of revaluations. In theory undertaken every five years (although the 2015 revaluation was postponed until April 2017), revaluations determine each ratepayer’s share of the £28bn rates bill. Businesses want more frequent revaluations – at least every three years – and with good reason: such a move would share the burden more fairly and help those firms struggling the most.
The Valuation Office Agency (VOA) that undertakes the revaluations seems doggedly resistant to making them more frequent. But that doesn’t mean the concept should be dismissed – it remains a good idea, and key to making the system more responsive.
Solutions should be implemented that would enable more frequent revaluations. At the moment the smallest two thirds of assessments pay just over six per cent of the overall burden – why not remove these from the system altogether? Give the VOA far fewer properties to assess and more frequent revaluations become readily achievable.
At the heart of the issues facing the business rates system is that it remains a complex and opaque tax. But effective solutions will only be found through genuine discussion and engagement rather than top-down imposition of policy. Constructive suggestions have been made to address the issues, but these have been roundly ignored.
With the review now not reporting until March, there remains time for UK plc to influence its recommendations. Business needs to make sure its voice is heard and its proposals taken on board. And the government needs to listen.