There have been few property policy decisions of recent times as controversial as the one to delay the 2015 business rates revaluation.
The instant reaction from the property industry was to ask for the reason. The answer, it would seem, is there are one billion reasons.
Research by GVA shows the government will accrue savings in the region of £1bn by not having to make transitional relief payments.
The relief system was set up to soften the blow to businesses that incur big rate rises from the revaluation. In the three years after the 2010 revaluation, it cost the Treasury £1.2bn.
GVA says perhaps the real reason for the revaluation delay until 2017 was to push the transitional relief payments off the government’s balance sheet for another two years.
Had the postponement not taken place, government officials would now be in the thick of number crunching new rates based on rents from April 2013.
But the delay means rates remain benchmarked for a further two years against those of the boom times of April 2008.
It is a decision many still find hard to comprehend, questioning the government’s rationale that it will help struggling businesses by keeping rates the same, despite rents having plummeted since the recession.
The government’s own Valuation Office Agency data suggests rents across the country have fallen by an average of 14% since the recession, while according to the IPD, some sectors and areas of the country have seen 20%-40% drops.
A Communities and Local Government spokesman justified the revaluation delay, saying: “Tax stability is vital to businesses looking to grow and help improve the economy. Postponing the 2015 revaluation in England will avoid sharp changes and unexpected hikes in business rate bills over the next five years.”
The revaluation delay has attracted fierce criticism from struggling landlords and occupiers, while several amendments have been proposed in the House of Lords to try to force a reversal of the decision.
Despite the protests and lobbying across many fronts, GVA says it recognises that there is unlikely to be a change in the decision.
This being the case, the agent says the government should re-employ its £1bn transitional relief savings to help businesses that need assistance the most.
Senior director David Jones says: “The revaluation deferment is creating continued hardship for businesses in some of the worst affected areas of the UK.
“We therefore favour easing the burden for those affected, but we recognise this could be difficult to target. Solutions exist however. We are calling on government to give some further thought to this matter.”
Jones offers three potential ways in which the transitional relief savings could be returned:
? Ensure an inflationary freeze in business rates for the 2015-16 and 2016-17 rate years.
? Ease the rates burden to business in the locations and sectors in England that have suffered most through the revaluation being deferred for two years.
? Increase empty rates relief to pre-April 2008 levels for a two-year period.
Jerry Schurder, head of rating at Gerald Eve, says he expects further calls for the government to abandon its revaluation delay after retail turnaround specialist Bill Grimsey reveals his alternative to the Portas Review for reviving the high street next month.
“Grimsey’s team has picked up on the perversity of the delay and is likely to call for more frequent valuations,” he says.
“There is still time to undertake a revaluation in 2015, perhaps using a valuation date of 30 September 2013. But while it would be equitable for this to happen, it seems rather unlikely.”
Writing in this week’s Estates Gazette, British Property Federation chief executive Liz Peace says the issue is not just the delay, but business rates themselves, which she calls an unfair way of making businesses pay for the space they occupy.
“As a tax-generating machine, it is looking distinctly creaky,” she adds.
nick.whitten@estatesgazette.com
