Are the new UK business rates unjust?

October 6, 2016

Business Rates are a tax paid by the occupier of a commercial property. Business Rates are worked out on a property’s ‘rateable value’. That is a figure determined by the Valuation Office Agency (VOA).

On 30 September 2016, the VOA published revaluations of 1.96 million commercial properties in England and Wales. The new business rates based on these revaluation figures will start from 1 April 2017.

It is possible for ratepayers to appeal against the valuation given by the VOA, however, in recent years, there has been much criticism of this appeal system, largely because of significant delays which has lead to businesses being forced to unfairly overpay this tax until a decision is reached, which for many has been years.

To address this, the Government has published proposals to reform the appeals system. Their consultation paper states that “Businesses need to have a better understanding of how their properties have been valued. They need to be confident that valuations are correct and that they are paying the right amount of business rates. Where this is not the case, it needs to be put right more quickly – businesses need refunds which are due to them as soon as possible. The system needs to be clear and easy to navigate so that businesses of all sizes can easily use it.”

It is generally agreed amongst the property industry, however, that these proposed reforms far from achieve these ambitions and instead will be time-consuming, expensive and slow with a particular unfair impact on the growth of small businesses and the overall economy.

The new system is a three phase process: Check, Challenge and Appeal.

1. Check

At this stage, the ratepayer has to confirm facts held by the VOA which their valuation is based on and give the VOA any additional missing information. These facts cannot be changed later on during the process so it is essential that they are accurate meaning ratepayers will be forced to seek appropriate professional advice and incur costs at a very early stage so that they get this right. This process will be slow, with an allowance of up to 12 months being given in which to complete it.

2. Challenge

This stage requires the ratepayer to provide significant and in-depth information about their challenge, evidence as to why it believes the assessment is wrong and give an alternative valuation. For a ratepayer to have to explain why the assessment is wrong when there has not been full disclosure of the grounds for the assessment at the ‘Check’ stage, is likely to make an acceptable challenge difficult, if not impossible. This will also be a slow part of the process; the ratepayer has four months to make the ‘Challenge’ with an allowance of up to 18 months being given in which to complete it.

3. Appeal

Following the issue of the VOA’s decision notice of the Challenge, the ratepayer has four months in which to appeal. At that stage, a fee will have to be paid by the ratepayer. That Appeal will be heard and determined by the Valuation Tribunal (VT). Not only are the VT a tribunal made up of lay and not professionally qualified members, but they will not be allowed to consider any new information, for example, witness evidence and that Appeal will be based solely on the evidence that was before the VOA at the ‘Challenge’ stage. This is likely to make this final stage of this final part of the process extremely unjust.

Many influential associations within the property industry including the Business Centre Association and the British Property Federation are urging their members to back them in their campaign to challenge these proposals and protect small businesses and the effects this could have on them. The consultation process closes on 11th October 2016.

Alexander HunterLawBite Commercial Property Specialist