Businesses could be forced to pay up to 20% higher business rates than they should, without any right of appeal, under new government proposals.
As a result the biggest ratepayers could be tens of millions of pounds out of pocket.
The plans were contained in draft regulations for England put forward by the Department for Communities and Local Government this week.
They propose that when considering an appeal, the Valuation Tribunal should order a change in the rateable value only where the original valuation is “outside the bounds of reasonable professional judgement”. That margin of error can be defined by courts as between 10% and 15%, but can be as high as 20%.
Jerry Schurder, head of business rates at Gerald Eve, said the move could, in effect, outlaw business rates appeals.
He said: “Businesses will be fuming that these proposed changes could in effect end the appeals process, all but removing the opportunity for firms to reduce their rates bills. Appeals could fall on deaf ears, with many dismissed because the Valuation Office Agency’s assessments were ‘within the bounds of reasonable professional judgement’.”
BCSC chief executive Edward Cooke said: “Despite numerous calls from business organisations for earlier and more open provision of the evidence used to determine this significant tax, government seems intent on making challenging rating decisions as hard as possible.”
On its website, the DCLG said: “The government is committed to delivering an improved business rates appeals system. There is widespread agreement that the current system is broken and in need of reform. By the end of March 2016 the VOA had cleared nearly 666,000 appeals on the 2010 rating list.
“While further progress will be made as VOA resources are transferred from revaluation 2017 to resolving appeals, too many appeals remain held up for too long, creating costs and uncertainty for businesses and for local authorities.”
How it might work
If a ratepayer believed an assessment of £100,000 should have been £80,000, an appeal could be prevented as the “margin of error” was within the bounds of reasonable professional judgment. Based on a 50p denominator, the ratepayer could be forced to pay as much as £50,000 over the odds during a five-year occupation of a property.
John Webber, head of rating at Colliers International, said: “For a business with a £200m portfolio, an unchallengeable 20% margin of error is going to pile tens of millions of pounds on to its business rates bill.”
Webber said the change could also shut the door on material change in circumstance appeals – such as where a retailer is affected by roadworks outside premises – as they tend to involve reductions of less than 10%.
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