COMMENT The government’s technical consultation is underwhelming – it’s time to make our voices heard, says John Webber.
The scope of the government’s latest, ongoing consultation sets out how it intends to give effect to measures arising from the recent business rates review final report published at the end of October 2021. Responses to the consultation need to be submitted by 22 February. The areas covered include:
- Measures to enable more frequent revaluations;
- Improvement relief;
- Support for investment in green plant and machinery; and
- Other administrative changes.
More frequent revaluations
The government has committed to more frequent revaluations from 2023 as it moves to a three-yearly revaluation cycle. This is a popular move, particularly given that only one revaluation has taken place in the 13 years between 2010 and 2023. However, the trade-off enabling the Valuation Office Agency to undertake the work in a shorter timescale means reduced appeal rights and increased administrative responsibilities on ratepayers.
The VOA has given the government a wish list which includes the annual provision of information, whereby the ratepayer will have to provide not only confirmation of physical details on an annual basis but updates on rent and lease information as well as trading information, even when there have been no changes. This will pass a significant bureaucratic burden on to the ratepayer.
To put this into context, currently out of approximately 1.9m ratepayers, 700,000 pay no business rates. These changes will therefore result in these 700,000 ratepayers being required to send one or more pieces of information annually to the VOA, even though their information is unlikely to be used.
This will have no effect on the amount of rates collected. At a time when business is supposedly being relieved of red tape in a post-Brexit world, the government seems to be proposing the opposite.
We recognise why the VOA may wish to receive such data. However, it has demonstrated over the course of the past 20 years that it is incapable of processing the information it already holds, let alone using this new information in a coherent way.
We are also concerned that the VOA will spend too much time wading through this information instead of getting the values correct or dealing with appeals in a timely manner – in order that they can carry out the regular revaluations within a timescale they have never achieved in their history.
Another concern is that a late return of any annual request or unreturned physical update information will result in a technical knockout of any appeal – something we know the VOA is fond of.
If the information could be provided by the ratepayer through an easy-to-comprehend online system involving limited time, then this annual request could conceivably be manageable. However, given the VOA’s track record on IT and interaction with ratepayers through the disastrous “check, challenge, appeal” system, we have serious doubts.
Overall, in our opinion, given the three-year cycle, the suggestion that everybody must provide an annual return is neither needed nor healthy for UK plc.
The consultation paper also discusses sanctions and penalties that will be imposed should ratepayers either not return the information or not return it in time. By contrast, there seems little indication or a willingness on behalf of the government to impose similar deadlines on the VOA, even though it is receiving half a billion pounds of additional funding.
The consultation paper sets out how more transparent the VOA will be. However, the timing is vague and extends well into the 2026 rating list and beyond. We strongly believe that the VOA should be far more transparent, and that transparency should start at the beginning of the 2023 rating list.
Improvement relief
The government has set out how it will introduce improvement relief, which is targeted at qualifying works which ratepayers carry out to their premises. While this is a step in the right direction, we have some doubts about the extent of this relief, particularly as developers and landlords are exempt from it.
It does not appear to be as generous as the scheme already in place in Scotland and, depending on how it is implemented, may have little consequence to ratepayers in their decision-making process.
Green plant and machinery
The government has set out several green measures which will exempt plant and machinery used in on-site renewable energy generation and electricity storage.
We think the government should go further in a more wholesale review of the plant and machinery regulations to make sure that developers, landlords and occupiers carry out investment in all new technology that makes buildings more sustainable, but without carrying an additional tax burden for a period of at least 10 years.
Other administrative changes
The government has also proposed several relatively minor administrative changes which, on the face of it, appear to be of little consequence. How the central list is administered may be of little consequence unless the government decides to make it far easier for the VOA to change the valuation approach to certain hereditaments and create a back door route of raising more revenue.
The government has also proposed simplifying the system which administers discretionary relief by local authorities. This relief can be a vital tool for local authorities to help specific businesses which may be experiencing hardship and underusing their premises.
On the face of it, these reforms appear sensible – however, in practice, the continued underfunding of local authorities across the country means that greater control by local authorities is meaningless.
Rating the government
The failure to deliver the much-needed fundamental business rates reform last autumn and replacing it with this consultation remains underwhelming to say the least.
We would mark this with a D – please stay behind after school.
- We urge all interested parties to let the government know their views by responding before the consultation finishes. Click here for details.
John Webber is head of business rates at Colliers International
