Out-Law News 3 min. read

Reform of 'broken' English business rates appeals could cost firms, says Colliers

Changes to the grounds on which the Valuation Tribunal for England (VTE) would be able to overrule the rateable value of commercial property would "all but remove" the ability of businesses to appeal ratings decisions, a commercial property firm has warned.

The government has proposed that the VTE would only be able to order a change to the rateable value of a property if the existing valuation was "outside the bounds of reasonable professional judgement", for valuations that take place after April 2017. Although a consultation on the proposals does not define this term, Colliers has claimed that this would prevent the VTE from revisiting rateable values that were out by as much as 20%.

John Webber, head of rating at Colliers, said that the proposals would "pile tens of millions of pounds" onto the business rates bills of those with large commercial property portfolios in particular.

"At a time when many firms, particularly in London and the South East, can expect their bills to skyrocket, this adds insult to injury," he said.

"This clear infringement of a rate payer's right to appeal their rateable value must not be allowed to form part of the government's business rates appeals whitewash. And with only weeks to go until the VOA [Valuation Office Agency] publishes new rateable values for every non-domestic property in the country, 300,000 businesses are still awaiting decisions about appeals lodged up to seven years ago. These proposed regulations are very draconian," he said.

The government intends to introduce a new three-stage 'check, challenge, appeal' approach to business rates appeals from 1 April 2017, the date on which a new national revaluation of rateable values will take effect. Business rates are paid by occupiers of non-domestic properties such as shops, offices, warehouses and factories; and are based on rateable values set by the VOA. Revaluations usually take place every five years, although the most recent revaluation came into effect on 1 April 2010 based on rateable values from 1 April 2008.

According to the consultation, the current business rates appeals system is "broken and in need of reform". The VOA had managed to clear the nearly 666,000 appeals on the 2010 rating list as of March of this year, but "too many appeals remain held up for too long, creating costs and uncertainty for businesses and for local authorities", the government said.

The new system has been designed to "manage the flow of cases through the system in a structured and transparent way", according to the consultation. It would begin with a 'check' stage, at which "facts concerning the property are agreed between the VOA and the ratepayer"; proceeding to a 'challenge' stage, at which the government anticipates that the "great majority" of cases on which agreement could not be reached would be resolved.

Under the new system, appeals would be reserved for "issues which remain outstanding and which are material, on the basis of arguments and evidence which have already been established". The new test, under which the VTE should only order a change in rateable value "where their view is that the valuation is outside the bounds of reasonable professional judgement", is intended to recognise the expertise of the VOA and ensure that the tribunal's resources are "focused on cases where there is a real issue at stake", according to the consultation.

John Webber of Colliers said that this new test would be particularly unfair for businesses needing to appeal the rateable values of their properties as a result of 'material changes in circumstances'. These are cases which are brought when there are physical changes to the property, the area or the way in which the property is used during the rating period, which may or may not be temporary; and which are usually for rates reductions of less than 10%. An example could be where the road outside a shop is being dug up, or where a similar business opens next to the business making the appeal, according to Colliers.

The government's consultation, which also includes draft regulations, closes on 11 October 2016.

Earlier this week, a new report (35-page / 1MB PDF) commissioned by the County Councils Network (CCN) showed a "wide variation" in the business rates collected between urban and rural areas, and between individual districts in local authority areas. Rateable values per head in London now average £3,700 compared to £851 in county areas, which the report found was due not only to the different property values but also to the larger numbers of rate payers claiming reliefs in rural areas.

The CCN, which is a network of 37 county councils and unitary authorities outside of England's large urban areas, said that the figures showed that "well-intentioned" plans to fully devolve business rates to local areas by 2020 could end up being unfair.

"We welcome the move towards financial self-sufficiency, but we urge Whitehall to work with county and district authorities to ensure that growth is not concentrated in small pockets of the country," said CCN vice chairman David Borrow.

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