ANNUAL BUSINESS RATES REVIEW AUGUST 2021
Executive Summary affecting tax liabilities foreshadow worse to come from the fundamental review of business rates? We have a further delay until at least autumn 2021 for those findings.
Robert Hayton BSc (Hons), MRICS President, UK Business Rates
This year I was delighted and honoured to take the reins as UK President of Expert Services at Altus Group. Although my role now encompasses all disciplines across the business, business rates continue to absorb a lot of my time. The Non-domestic Rating (Lists) (No. 2) Bill, moving in law the next Revaluation in both England and Wales to 1st April 2023, received Royal Assent in March and will be based upon an estimate of open market rents on 1st April 2021. This was the right thing to do by Government. It would have been incomprehensible to expect businesses to tolerate a new rating cycle that simply excluded the effects of something so significant as COVID-19. In my view, however, it was wrong to legislate against Material Change in Circumstances appeals. One of the few things that ratepayers appreciate regarding the business rates system is the right to challenge assessments which are excessive. The impact of COVID-19 gave rise to an appeal right, and Government allowed hundreds of thousands of ratepayers to incur costs in pursuing this only to retrospectively legislate to prevent appeals proceeding. A double kick in the teeth for business. Does the Government’s willingness to make retrospective legislation
In place of the ordinary right of appeal, Government announced a relief fund which business will be able to access. Unfortunately, at the time of writing, we are awaiting details on eligibility criteria and the application process which isn’t now expected until the legislation has completed its passage through Parliament. The phrase too little, too late springs to mind. Whilst occupied retail, leisure and hospitality premises in England will have received more than £17 billion in rates relief, all other sectors, including offices which were under a work from home instruction for the best part of 16 months, will receive only around 9% of that in a scheme when it does eventually land. The postponement, undermined by the loss of appeal, leaves hundreds of thousands of ratepayers shouldering outdated tax bills until 2023, based upon rents in 2015 that bear no resemblance to the market today. This is certainly a threat to the postpandemic recovery. Government’s two ‘repair agendas’ for their economic recovery plan include “build back better” and “levelling up”. These phrases cover a huge range of tasks and policies that not only require significant investment but also a change in political mindset to succeed. The plan for growth through building back better is based upon infrastructure, skills and innovation whilst meeting the legislated goal of carbon net zero. All laudable. But green growth requires large scale changes in not only the behaviour of business but the actions of Government. Taxation must be a key policy for providing clear and sustained incentives to reduce environmental damage as we tackle climate change head on.
As the UK hosts COP26 later this year in Glasgow, it would be unthinkable to head into that conference with the business rates system continuing to penalise those organisations which integrate sustainability into their strategies. “Levelling up” must reduce the inequalities that exist between different parts of the UK and ensure communities no longer feel like they are being left behind. But asking underperforming sectors and regions to pay more in tax through downward transition to help subsidise those better faring economies, not only undermines that policy but works against it. With the Government reporting on the system of business rates in England later this Autumn, it is clear that these slogans must translate into effective tax policies to support the recovery plan. “Building back better” and “levelling up” are interlinked to the everincreasing burden of business rates, which our clients tell us acts as a disincentive to invest. The freeze in the multiplier for this financial year was a good start, but ending the ridiculous policy of annually increasing upwards the tax rate and instead focusing on growth is a far better way for local authorities to increase their local taxation revenues to fund local services. Rishi Sunak has an unenviable task ahead of him. Expectations are high, particularly within the retail sector. But with Government borrowing over £300 billion to combat COVID-19 in the first full year of the crisis, does the Chancellor have the financial headroom to placate a vocal and critical sector? Our five-point manifesto for change has sought to adopt a pragmatic approach to reform against a backdrop of record peacetime borrowing. One thing is for sure, the pandemic cannot simply be an excuse for the failure to deliver meaningful change.
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