Business rates: will the election bring about much-needed relief?

As we approach the political party season and the Autumn financial statement, retailers and their agents are calling for a freeze in business rates. And who can blame them? Since the current system has been introduced, the rate in the pound has increased from 34.8p in 1990 to 51.2p currently, or 49.9p for lower value properties.

The chancellor will likely respond to the calls by saying that the UBR (uniform business rate) has been held at the current level since 2020/21. While this is factually correct, it hides the fact that commercial property rental values have not been keeping pace with inflation, and therefore the trend has been for an increasing UBR.

The chancellor may also respond that billions of pounds of support has already been given to ratepayers. However, with the exception of the 100% relief for retail, hospitality and leisure during a period when the majority were unable to open, support has been limited. The current measures offer 75% relief for qualifying ratepayers, though this is capped at £110,000 per annum which limits its benefits significantly. It is somewhat of a surprise that more people have not pointed out this flaw in the scheme.

In the last decade, the government has published more than 12 separate consultations, reviews and discussion papers aimed at reviewing the business rates system, tackling issues such as the revaluation process and formal challenge system. The responses to many of these have been similar: business rates need reform and avoidance is an issue, but so is the rate in the pound.

The ‘Check, Challenge, Appeal’ process has had the desired effect of reducing the number of ratepayers formally questioning their rateable value, though whether this is because rateable values are correct is questionable. It may instead be because the process is too complex. After all, there is no ability for ratepayers to know what evidence the Valuation Office (VO) has used to arrive at the valuation even if you appeal, as the VO will only respond to evidence the ratepayer submits. The Non-Domestic Rating Bill currently going through Parliament may correct this by allowing the VO to release relevant information.  However, it is likely to be 2026 before this comes into effect – in the meantime, businesses remain in the dark.

It is likely that the Duty to Notify, also in the bill, will come in to force slightly before that, imposing a duty on ratepayers to provide information on any changes that may affect the property’s rateable value to the VO. This information will need to be supplied after any physical change to the property, rent or lease, along with an annual requirement to confirm all information has been provided. It is going to be interesting to see how this works out.

The likely outcome is that ratepayers without professional advisers will fall prey to unscrupulous companies using the threat of big fines to get the unwary to sign up to their services. While the bill proposes action against rogue agents, whether this will protect them is unclear. Whether the VO has the resources to process all the data they are about to receive is another issue; with 2.15 million properties in the 2023 Rating List, this works out to 860 submissions needing processing every working day.

While all these changes are in theory good, even if delayed, none of them address the fact that the rate in the pound has increased by nearly 50%. This has frequently been observed in responses to business rates consultations, but has fallen on deaf ears. This is not necessarily surprising. After all, reducing the UBR means tax income goes down, though more profitable businesses will have other benefits to fall back on, including increasing corporation tax income.

With uncertainty rife, one thing we can be sure about is that further action to increase rates bills will likely be limited as we approach an election within the 2024/25 rate year.

Chris Grose is a director at Hartnell Taylor Cook