Posted: Wed 25th Aug 2021
Fundamental business rates reform "is long overdue" and annual revaluations should be introduced, the British Property Federation (BPF) has said.
The BPF made the demand in its response to the government's consultation on business rates which closed on Tuesday. Ministers have proposed revaluations moving from every five years to every three years.
Current business rates are even older as they are based on 2015 revaluations and will not be updated until 2023 due to delays as a result of the coronavirus pandemic.
Melanie Leech, BPF chief executive, said: "The business rates system is undermining town centre recovery and poses a significant risk to the future of our high street businesses. Business rates have become so unaffordable, they are now hampering town centres’ ability to adapt, modernise and thrive.
"We welcome this first step to increase frequency and transparency of revaluations, but the government must recognise it is only the beginning of the journey to create a more sustainable and fairer system. We need annual revaluations and transparency over how valuations are determined, more frequent revaluations is only one piece to the jigsaw."
Business rates have long been a contentious issue and several governments have pledged to reform them, but businesses and representative groups say that the system remains unfair and burdensome.
The government is also proposing that businesses would be required to submit property and occupier updates to the Valuation Office Agency (VOA) annually. If they wanted to challenge a valuation decision, they would have to pay a fee which would be refunded if the challenge is successful.
Other groups have opposed that idea. In a joint response to the consultation, UK Hospitality and the British Institute of Innkeeping said the hospitality sector overpays by 300% relative to its turnover in the current system. This amounts to £2.4bn a year.
The groups said the government's proposals would "put a significant administrative burden on hospitality businesses" and instead proposed:
Businesses are not asked for more information than they currently are at revaluation: the need to report amendments mid-list is burdensome and will actively discourage investment in the sector at a critical time.
The move to more frequent revaluations be considered as part of the broader review of business rates – which should be designed to reduce, not increase, the burden on ratepayers.
The VOA should enhance its technological systems to facilitate data returns at valuation.
Businesses should not be charged for challenges, nor should there be fixed windows in which to bring a challenge.
The joint statement continued: "The current business rates system has long been unfit for purpose and puts an unfair burden on pub and hospitality businesses. It’s extremely encouraging that the government is proposing to increase the frequency of revaluations, something for which we have been calling for some time. However, the proposals are severely undermined by administrative burdens, limits on appeals and penalties.
"It’s vital that government reforms match the severity of this issue. This proposal is helpful but does not redress the wide-ranging issues with the current system that will severely hamper the sector’s ability to recover from the pandemic if not addressed.
"We urge the government to work closely with the sector to implement wide-ranging reform that will empower hospitality businesses, to rebuild and repair revenues, create jobs and be at the forefront of the economic recovery."
In a report earlier this year, retail veteran Bill Grimsey said business rates is "a broken and outdated taxation model, which urgently needs an overhaul, as it’s holding high streets back".
He called for the government to be "bold and decisive" with its review and suggested that a 2% sales tax at the point of sale would raise the same amount from retail as business rates currently does. It would also "level the playing field between online and bricks and mortar retailers," Grimsey claimed.
The government is expected to respond to the consultation in the autumn.