Industries blast “unjust” business rates proposals

25 Sep 2016

Policy area: Tax & Finance

A coalition of influential trade bodies has urged the government to abandon “unjust” changes to the business rates appeals system that could leave businesses over-paying tax by 10% or more for several years.

Proposals put forward in a DCLG consultation suggest that the Valuation Tribunal for England (VTE) will only be able to order a change to business rates liabilities when it considers that they are inaccurate outside “the bounds of reasonable professional judgement”, a nebulous concept which could be difficult to determine.

In a joint letter to Communities Secretary Sajid Javid, the organisations warn that that the proposals, if brought forward, will:

  • Cause individual businesses to sink into hardship, pushing those already struggling into insolvency;
  • Undermine businesses’ confidence that their rates valuations are correct; one of the government’s main aims in reforming rates appeals;
  • Potentially lead to a host of legal challenges, particularly as to what constitutes “outside the bounds of reasonable professional judgement”; and
  • Prevent an independent organisation (the VTE) from correcting excessive tax assessments.

The letter points out that OECD studies show that the UK now has the highest level of property tax, measured as a proportion of GDP, of any major developed economy.

It further notes that in 2000 the government consulted on a similar proposal, but deemed it unfair to ratepayers and concluded that it should not be adopted.

Ion Fletcher, director of policy (finance) at the British Property Federation, said: “It is hard to see how these proposals improve our broken business rates appeals system. They will undermine ratepayer confidence and compound the already high burden of business rates. Not only do businesses and jobs suffer as a result, but the more money that is spent on business rates, the less that is available for property owners to invest in improving our towns and cities.”

Kate Nicholls, chief executive at the Association of Licensed Multiple Retailers, said: “The subjective notion of “professional judgement” would cause problems and inconsistencies throughout the process and across the entire system. Furthermore, because pub valuations are based on hypothetical ‘fair maintainable trade’ the additional scope for interpretation will compound the likelihood of error in the system.

“A potential dismissal of the appeal on such vague grounds will only add to the disincentive to resolve through mediation. At a time when the appeals process is already placing additional financial burdens on businesses, unclear complications such as these are an extra, unworkable burden.”

James Lowman, chief executive of the Association of Convenience Stores, said: “Business rates are already one of the biggest fixed costs for many convenience store retailers, especially those operating on petrol forecourts. We do not believe that the appeals proposals are fair, and are concerned that retailers who are successful in their appeals could still end up paying up to 10% more than they should do.”

Jennifer Brooke, executive director of the Business Centre Association, said: “The business centre sector is based on the principle of providing flexibility, which in turn facilitates the growth of micro-businesses, start-ups and growing companies – all of whom make a substantial contribution to local economies and communities. Such businesses lead in technological evolution making a significant contribution to UK Plc in real terms and through innovation and invention. An unfair tax, which could result in businesses over-paying by 10% or more for several years, risks reducing this flexibility and acts as a brake on the opportunities for the growth of small businesses across the country. This can only be detrimental for the economy as a whole.”

Edward Cooke, chief executive of Revo, said: “Industry has collectively held numerous meetings with ministers and officials on creating a business rates appeals process that works for business and government. Despite the positive noises from Marcus Jones MP and others what has been unveiled is manifestly unjust and shows no indication of a desire to work in partnership with the private sector to create a more transparent and efficient tax system.

“The irony being those who stand to lose most are small businesses, a group government is claiming to support.”