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Business Rate Reform Update: Business Rates Administration Review

On 13 February 2014 government published terms of reference for the review of business rates which has been reproduced below.

Terms of reference – Business rates administration review

The Exchequer Secretary to the Treasury (David Gauke): The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis) and I have today published the terms of reference for the government’s review of business rates administration. This follows the Chancellor of the Exchequer’s Autumn Statement, where he announced a £1 billion package of business rates measures which benefits all 1.8 million ratepayers and means that around 360,000 small businesses pay no rates at all, and committed to discuss with business options for longer-term administrative reform of business rates post-2017. The terms of reference are set out below.

Terms of reference

Business rates are a tax based on property values. In England they raise around £23 billion each year, which helps fund services provided by local government. The review will consider the way in which the business rates system in England is administered by the Valuation Office Agency and local authorities, with a view to strengthening its responsiveness to changes in property values and its simplicity and transparency to business ratepayers.

The review will include consideration of the:

1.) Administration of billing and collection by local authorities, including the application of reliefs and exemptions; and of valuation by the Valuation Office Agency, including the scope for improvements in communication and the exchange of information between ratepayers and public bodies;

2.) The circumstances under which liability can be backdated;

3.) Changes to valuation methods, consistent with the principle that business rates are based on rental property values and that the rates retention system rewards local government for growth in values; and 

4.)Frequency of revaluations to enable tax assessments to be based on up-to-date property values.

In considering possible changes to the business rates system to be made post-2017, the review will balance the need for any system to deliver fairness, stability and predictability to ratepayers. Any changes will need to maintain the aggregate tax yield from which to fund local services, preserve the same level of financial autonomy to authorities and the local incentives to promote growth that were delivered through the implementation of the business rates retention scheme introduced on 1 April 2013.

The proposed review will deal only with the refinement of the extant rating system and will not depart from the process of assessing Rateable Values by reference to open market rents. It will not encompass the wider concerns expressed by the business community and calls for alternative bases of local taxation.

Louch Shacklock notes that the outcome of this review will “need to maintain the aggregate tax yield from which to fund local services” so it will not be likely to be an aggregate saving in terms of the overall tax take.

Consultation on the Process for Checking and Challenging the Rateable Value of Business Premises

In December 2013 Department for Communities and Local Government commenced consultation on the process for checking and challenging the Rateable Value of business premises. The consultation lasts for 12 weeks until 3 March 2014 and will aim reform the existing appeal procedure to.

1.) Improve the transparency of the valuation process (including disclosure of more information on rental evidence). This will allow ratepayers to check their rateable value without having to make a formal challenge, improve confidence in rateable values and overall confidence in the rating system,

2.) Bring business rates into line with the way official decisions are normally challenged by requiring ratepayers to provide with their challenge an explanation of why they think the rateable value is wrong, an

3.) Enshrine in law a more formal separation in the challenge process between the Valuation Office Agency and the Valuation Tribunal for England by more clearly separating the administrative “proposal” stage in the Valuation Office Agency from the independent judicial “appeal” stage in the Valuation Tribunal for England. 

Louch Shacklock broadly welcomes DCLC’s proposals. We believe that the open provision of rental data by the Valuation Office will improve the transparency of the valuation process and enable the ground for challenge to be more clearly identified. We believe that challenges should only be made after research and when the grounds for appeal have been identified. All too often some rating consultants submit speculative or blanket appeals which only have the effect of raising client expectations, clogging up the system and ultimately failing to produce tangible benefits.

We question why two separate consultation review and processes have been established for ostensibly related matters.