Business Rates
New Rating Bill is changing Business Rates
The Business Rates system is to change (slightly) and there will be an impact for ratepayers, including an increase in administration and possible hefty fines.
The Non-Domestic Rating Bill will soon be enacted; the third and final reading in the House of Lords was on 16th October and is likely to receive Royal Assent soon – probably in time for an announcement in the Autumn Statement.
The Government has wanted to amend the Business Rates system for years. This is the first piece of primary legislation that sets a tone for future changes but it is interesting for what it does not cover rather than what it does – it does not tackle the incredibly high rates multiplier (likely to be increased to well over 50p in the pound for 2024/25) nor empty property rate provisions, the latter subject to another recent consultation.
The Bill is wide ranging, and some measures will not have a direct impact on your business. But the following are the main points to note:
- Confirmation of 3 year Rating Lists:
As of 1st April 2023, Rating Lists will be three years in duration. Previously, this was 5 years (often extended mid-List). The valuation date will remain 2 years pre-revaluation. We are already collating evidence for the next Rating List, which starts on 1st April 2026 (valuation date 1st April 2024).
- Duty to Notify – Likely pre-2026
This change will be an enormous administrative burden for ratepayers and changes the current status quo: at present the onus is on the VOA to collect and gather property data – ratepayers currently do not have to show their hand. This emphasis will be flipped and that statutory duty of the Valuation Officer removed.
Ratepayers will be obliged to make an annual confirmation that the premises’ data held by the VOA is correct.
The ratepayer must also inform HMRC within 60 calendar days when they become a new ratepayer of a premises and notify the VOA within 60 days of any changes to a property or lease terms. From 2026 the government will introduce a sanctions regime; potentially punitive financial penalties will apply for non-compliance or false information (the latter is a criminal offence).
Three new Reliefs:
- Green energy and decarbonisation – mentioned in the Spring Budget and linked to the below; some plant and machinery will receive 100% first year relief on capital allowances, including rooftop solar panels, battery storage used with renewables and electric charging points
- Low carbon heat networks – new 100% relief for eligible low carbon heat networks which have their own rates bills
- Improvement Relief – This measure is to provide relief against the increase in RV following improvements made to a commercial property, for one year post completion of the works to improve a premises. There are eligibility requirements, including the ratepayer must remain in occupation during the works. This provision will last until 2029
- Transitional Measures:
In the past the impact of large increases or decreases in Rateable Value (“RV”) have been cushioned by transitional ‘phasing’ measures to lessen the impact on cash flows:
- a large increase saw gradual annual upward phasing
- a large decrease saw ratepayers penalised by slowly graduated downward phasing of their liability.
Downward phasing has been removed for the 2023 Rating List – a major win for some ratepayers..
- Completion Notices - refurbishments
Completion notices are a way of forcing a nearly completed ‘new’ property into the Rating List, where a Local Authority considers a property complete or where it can be reasonably expected to be completed within three months.
The Bill intends to advance the definition of a new building. An existing property subject to redevelopment, that could become capable of beneficial occupation, will be considered a ‘new building’. This includes structural alterations of an existing building to create new assessments and buildings, or parts of a building, within an assessment which is or was in the list and subject to alteration – a loss for ratepayers.
- Material Change in Circumstances (“MCC”) reform
Ratepayers can no longer appeal their RV if government guidance and regulations which affected the use of a property, or changes in a locality, are instigated. This continues the approach when government changed the law in light of the huge impact of Covid-19 lockdowns and distancing rules – another loss for ratepayers.
The Bill addresses a lot of changes that Government has wanted to make to the Business Rates system for years. What ratepayers really need is for Government to reduce the monstrously high rates multiplier through reducing the circa £26Bn per annum business rates expectation and to also not penalise occupiers and landlords who hold empty property.
The measures in the Bill will likely ease the burden on an underfunded and understaffed VOA by stacking the burden on ratepayers, incurring headaches on compliance and no doubt the occasional onerous fine for non-compliance.
Regardless as to the level of impact these measures have on your business, engaging the services of Allsop Rating Department will be more important than ever when looking to mitigate your business rates.