Getting irate about rates: the headache of the Business Rates revaluation
The purpose of a rating revaluation is to re-balance payments in line with rental values. However, the government’s postponement of the planned 2015 revaluation and their application of transitional relief has led to an uneven, unequal and confusing system where the winners are few and the losers are many.
While there has been much focus on the steep increase that occupiers and retailers will face in London, the situation has been complicated for ratepayers up and down the country. Ironically this is due to the government’s attempts to ease the transition of those rate payers that will be paying higher rates under the new system. Under the system, the ‘winners’ have to pay for the relief granted to the ‘losers’ by paying more than they should under a new phasing system negating the very redistributive purpose of holding a rating revaluation. The introduction of a third tier of transitional phasing has also complicated matters further bringing in different phasing speeds across all sectors for properties under £20,000 Rateable Value (RV) or £28,000 in London and the new tier for properties up to £100,000 RV. So those in the North East caught in downwards phasing will continue to subsidise London ratepayers by contributing more in rates; and the Londoner will have to pay some of the largest single increases in rates payable between 2016-17 and 2017-18 as the main ‘losers’ from the less generous phasing for larger properties.
The changes that the government has made to the rating appeal system are also unnecessarily draconian and incredibly bureaucratic. The new ‘Check, Challenge and Appeal’ system makes it very difficult for businesses to contest their rates. A U-turn similar to the one the Chancellor made on National Insurance Contributions would be welcome on these damaging appeal changes.
The Spring Budget may have contained welcome news regarding business rate reform but to rate payers dealing with the sting of higher bills now 2022 seems a lifetime away. There has been a massive 38% increase in the rate multiplier since 1990 and rates are frequently the third largest outgoing after salaries and rent. While there is much to be said in favour of Business Rates, the tax needs to be revamped to prevent the chaos and uncertainty that late changes and tinkering to the tax causes and to keep up with the evolving business and particularly retail world. We support the calls for more frequent valuations, a reduced period between the antecedent valuation date and the list coming into force as well as the need for online spending to be taken into account.
You can read our latest report on the rating revaluation and its impact here.