Government publishes Bill introducing more frequent revaluations for business rates

The Non-Domestic Rating Bill, which introduces business rates revaluations in England every three years instead of the current five, has been published by the government.

Business rates (also known as non-domestic rates) are based on a property's 'ratable value'. Rateable values are regularly reassessed in a process known as a 'revaluation'.

Revaluations currently take place every five years, but the system has been criticised by many groups over several years because it means the amount of business rates some firms pay does not reflect the value of the property so they can end up paying more than they should.

The new Bill introduces revaluations every three years which the government says means rates are "fairer and more responsive to changes in the market" so "those with falling values will see their bills drop sooner".

Local government minister Lee Rowley MP said:

"The introduction of our Non-Domestic Rating Bill seeks to deliver the reforms announced during our business rates review.

"We are bringing the administration of the tax up to date, and making the system more responsive to changes in the economy and introducing new support to reduce barriers to business investment.

"This is another step in the right direction for making sure the UK continues levelling up and supports businesses to grow and flourish."

The changes have been welcomed by business groups, but there are still demands for the government to go further.

Charlotte Thomason, head of policy at Enterprise Nation, said:

"We welcome many of the common-sense changes introduced in the Non-Domestic Business Rating Bill, particularly on more frequent revaluations, and the 12 month delay to increased bills after property improvements.

"However, there is still much to be done to ensure that small businesses are not priced out of local towns and cities by daunting business rates charges.

"While these current changes are moving in the right direction, we hope this continues to be an open discussion, and further fundamental changes are still within scope.

"The system needs a complete overhaul, but the reality is that it's unrealistic at this late stage of the government's electoral cycle."

Melanie Leech, chief executive at the British Property Federation, said:

“A move from five to three yearly revaluations is a marked improvement, and we would like to see government continuing to strive towards even more frequent revaluations in due course.”

As part of the change to three year revaluations, a new rule means companies will have to report to the Valuation Office Agency any changes to the property that are relevant for valuations within 60 days of making them. They will also need to submit annual reports.

The government says the change will cost businesses £35 a year, although real estate advisory company Gerald Eve has claimed it is more likely to be £150 a year.

Simon Green, head of business rates at Gerald Eve, said:

"The government has quietly pushed out confirmation of the proposed changes to the way business rates information is collated, putting far more burden on businesses who are already stretched and trying to survive during this cost-of-living crisis and economic downturn.

"According to the documents, informing the authorities will only cost ratepayers £35 a year.

"But we have no idea how the government has come to that figure. A far more realistic estimate would be an average of £150 a year for each and every rateable property, although it could be far higher for businesses that see more regular changes."

Business rates improvement relief

Also in the Non-Domestic Rating Bill is the new business rates improvement relief which means businesses in England making qualifying building improvements will not face higher business rates bills for 12 months.

The government says the relief "will make it easier for businesses to invest with new reliefs for property improvements, providing tax breaks for businesses who are extending or upgrading their property".

Business rates changes on 1 April

The new Bill comes ahead of the introduction of the latest revaluation of non-domestic properties in England, Scotland, Wales and Northern Ireland on 1 April.

In England, Wales and Scotland, ratable values will reflect the property market at 1 April 2021 and in Northern Ireland at 21 October 2021.

Find more details about the business rates changes here.

Labour pledge to scrap business rates

The Labour Party has said it would scrap business rates and replace them with a new form of taxation if it comes to power.

Shadow chancellor Rachel Reeves has promised that the party would conduct more regular valuations of property, provide instant discounts if property falls in value and deliver incentives to businesses moving into empty premises.