Government set to introduce self-assessment for business rates

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John Webber, Head of Rating, Colliers International. Copyright Nick Cunard / NCSM Media.

Self-assessment for business rates is now on the cards, according to Colliers International, the global commercial real estate agency and consultancy.

Business rates levels – based on notional rents at a certain point in time – are currently recalculated by the Valuation Office Agency (“VOA”) every five years. However, because market conditions can change so rapidly in any given five-year period, there has been a pressure on Government to introduce more frequent revaluations which more accurately reflect the economic position if and when it changes.

In March 2016, the Government launched a consultation, ‘Business rates: delivering more frequent revaluations’. Although UK businesses and organisations responded to the consultation with their ideas on how to revalue more regularly, Government has still not published its response.

The Government is now believed to favour a self-assessment option akin to income tax, turning on its head the 400-year old business rates system and placing the burden of red tape on to the ratepayer to make a correct assessment or face significant penalties.

According to Colliers, there are around two million properties paying business rates. This brings in something in the region of £26 billion per year for HM Treasury.

John Webber, Head of Rating, Colliers International, revealing this massive shift, said:

“The official line is that the Government is looking at all the options. However, my sources have confirmed that the ‘Big Four’ accountancy firms have been consulted on how to make self-assessment work and what lessons could be learned from personal taxation. I now understand the Government favours self-assessment not only as a way of delivering more frequent revaluations, but also as a quick-fire method of cutting costs at the VOA which is itself sitting on a backlog of over 300,000 business rates appeals.

“We are calling on the Government to delay no longer. Ratepayers – many of whom are about to experience rates’ increases not seen for a generation – should not be used as a political football. They deserve clarity if they are going to have to take on the confusing task of assessing their own properties for business rates.”

Last year, Colliers accused the Government of introducing a new business rates appeals’ regime against the advice of industry rating experts. The global property consultancy said: “ ‘Check, Challenge, Appeal’ will be more confrontational, more litigious and more costly…if the proposals become law without significant changes, then the new system will severely restrict the business owners’ rights to appeal.”

Webber continued:

“Ever since this Government made the fatal mistake of delaying the last revaluation, it is UK firms up and down the country that have paid the price. The system has been brought to its knees by bad decision-making by politicians who cannot look any further than the next election. The business rates appeals system has completely failed, the new appeals’ regime is entirely unfair and now the Government is set to overhaul business rates, placing yet more burdens and red tapes on British firms. It is simply not fair.”

Colliers Manifesto for Business Rates Reform:

1. More frequent revaluations, three-yearly, at least, by 2022;
2. Increase funding for VOA in order to deal with existing appeals’ backlog;
3. Release VOA from pressure exerted by local councils and HM Treasury;
4. Introduce a register of appeals professionals  – removing the ‘cowboy’ element;
5. Iron out inequalities where small business pays a higher proportion in business rates;
6. Root and branch reform of current business rates exemptions and reliefs.