Business rates have become increasingly contentious in recent years with the Government announcing a number of changes and updates that have failed to address the underlying problems with the system. With the 2017 Autumn Budget announcement confirming firstly that there will be a further revaluation of all properties in 2022 in England and Wales, followed by three yearly revaluations thereafter, what does this mean for the future of this tax?
Business rates raise almost £30 billion a year for the Government and have one of the highest collection rates of any tax. Both of these facts confirm the importance of business rates to the economy. However, this importance has not been matched by the Government’s commitment to its efficiency and fairness.
The Valuation Office Agency (VOA), which is charged with setting rateable values for all commercial properties in England and Wales, is severely underfunded and under-resourced. This has resulted in a poorly regulated appeal system, which has allowed a huge number of unnecessary appeals to be submitted and a backlog of more than 200,000 cases.
In addition, the desire to maximise revenue from the system has transformed the once comparatively modest uniform business rate across the country into a complicated and expensive range of multipliers and supplements which can be applied to any individual rateable value, depending on the size and location of the property.
The localisation of business rates to enable local councils to retain more of the rates they collect means that they directly benefit from investment into new development in their area. In theory, this is a credible system which allows Local Authorities, and their residents, to benefit from their own success. However, it has also created a situation where the budgets of those Local Authorities are far more volatile as they’re also responsible for refunding monies following successful appeals.
We are now in a position where ratepayers, Local Authorities and the VOA themselves are all disgruntled with the system. So what is the solution? Sticking plasters have been administered, but with little healing effect. The shake up of the appeal system in England through the introduction of ‘Check, Challenge, Appeal’ has been less than successful, with its implementation rocked by IT issues, a lack of ongoing funding and the VOA assigning insufficient and inexperienced staff to manage it.
Recent announcements of office closures within the VOA and the further loss of experienced valuers raises doubts about their ability to maintain the fairness of the tax and the appeal system.
In view of having already set off along the localisation route, one solution to enable revaluations in 2022 and beyond could be to continue this journey and make Local Authorities responsible for setting and defending rateable values in their own areas. The money saved from funding the VOA could be diverted to Local Authorities to allow them to employ their own team of surveyors who will have local knowledge and local accountability.
The attraction of this to ratepayers is that it would be a significant step back towards the previously more efficient and fairer system with local accountability.
Could this be a blueprint for the future of Business Rates?