Britain’s business rates appeal system is “unhealthy”

Latest figures announced at the end of last week reveal many businesses are now seeing their business rates appeal challenges struck out, often on a technicality, in a way that does not bode well for the ratepayer.

Challenges are the second stage of the Valuation Office Agency (VOA) business rates appeal system – Check Challenge Appeal (CCA) – and occur after a property has been ‘checked’ into the system.

According to government statistics, in the first 12 months of the new 2023 list (1 April 2023 to 31 March 2024), 63,100 ‘checks’ (the first part of the appeal process) were registered of which almost 17% remain outstanding. However, of these only 7810 of these have progressed to the ‘challenge’ stage of the process, and of these challenges, 5,930 (a massive 76%) are still outstanding. Only 990 (12.6%) of challenges have actually been resolved, but nearly as many (890 – 11.4%) of challenges have been labelled as “incomplete” by the VOA and therefore are to be struck out/declared void.

The VOA’s lack of progress in resolving these challenges should raise questions. But equally questionable is the high numbers of challenges now struck out as “incomplete”. Given the difficulty for businesses in registering a check in CCA in the first place, most businesses now use professional rating surveyors to get them through the system. An 11.4 % rejection rate on grounds that are often unexplained, is unacceptable and shows how difficult this system is becoming for ratepayers.

Currently the VOA can strike a challenge out as “incomplete” without giving any explanation as to why or entering a discussion with the ratepayer or their adviser. We label these as “technical knockouts”. The ratepayer is merely told if he/she does not like the decision to pay up and “go to tribunal”. By contrast, a ratepayer or their adviser on receiving the news that the challenge is “incomplete” can, in many cases, only be given 24 hours to dispute this. It’s certainly not a fair two-way system.

The latest CCA stats for the 2017 list, also reported last week, bear this trend out further. The figures reveal as many as 22,900 challenges against the 2017 list are still outstanding. This means that more than seven years after the start of the 2017 rating list, 12 % of the appeals submitted have still not been resolved. And another 22,280 challenges (11.8%) have also been marked “incomplete” or struck out.

Our research shows that there were 3,890 new “incomplete” cases last year alone for appeals against the 2017 list. In most of these cases the ratepayer now has no further recourse to appeal.

So why is the VOA acting in this way? Our belief is that given the worrying number of challenges outstanding from the 2021 and 2023 lists, the VOA is under pressure to reduce the numbers, and this is one way of doing it. It is astonishing that the numbers struck out on technical grounds almost equals the total number resolved. The VOA’s refusal to explain or to negotiate their decisions is also extremely unhelpful for businesses in all sectors.

We advise clients in the advertising hoardings industry, who have recently put in a challenge to their business rates. Rather than discussing the values at pre-group discussion stage, the VOA has refused to communicate or negotiate and announced “no change”. This means any appeal must now go straight to the costly and timely tribunal stage to be heard. The VOA appears to be playing both judge and jury and this goes against the spirit of what CCA was set up for.

And the pressure on the VOA is going to get worse. In addition to the outstanding backlog of challenges from 2023 and 2017, it now has had to start work on the next 2026 revaluation, with a new list valuation date of April 1 2024. We believe it is severely under resourced to deal with this new list.

Against this background, it is perhaps not surprising that there has been pressure to reduce the challenges from the lists, but it is still shocking how public servants seem more concerned about massaging the figures and using the process to knock out challenges, than in getting to the right values and answers. The striking out of legitimate challenges purely to keep numbers down reveals how unhealthy the current system has become and how difficult it is for businesses unhappy with their rates bills to do anything about it.

As pressure on the VOA’s resources grows, we fear the trend will only get worse. British business certainly deserves better.

John Webber is head of business rates at Colliers