Business rates revaluation delayed until 2023 - Alastair Mylechreest of ASH and Co
The communities secretary, Robert Jenrick MP, has announced that the proposed business rates revaluation of 2021 is to be postponed until 2023 - but what does this mean for small businesses?
Since 1990, when all commercial properties were revalued for the first time in 17 years, successive Governments have sought to undertake revaluations on a more regular basis, to allow values to more adequately reflect changes in local and national economic trends.
It had been proposed that the 2021 revaluation would bring this to a shorter frequency of four years, however, it has now been set back to the more usual five yearly pattern.
The Government have stated that they have reacted to businesses' concerns about the timing of the revaluation and hope that the delay will remove some uncertainty.
They have also announced that they will be undertaking a fundamental review of the business rates system.
Revaluations use a valuation date of two year prior to the revaluation so that the exercise is carried out on the basis of hard evidence; therefore, the next revaluation will be based on 2020 values rather than values from 2019. Therefore, any corrections in the market as a consequence of the effects of COVID-19 should be drawn into the new revaluation. And it is hoped that the exercise will avoid any businesses who might otherwise have seen increases in their liabilities due to the improving market of 2019 may have a more realistic post-COVID valuation to be the basis of their tax liability going forward.
Many business leaders are welcoming the move which, at face value, does appear to be well founded. However, new bills will not be issued until April 2022, by which time the economic landscape may look quite different. Furthermore, finding evidence of rental values at 1 April 2020 is likely to be quite challenging as, during the lockdown period, there were not a vast number of transactions being undertaken to form the evidence base upon which the Inland Revenue Valuation Office Agency will be relying. It is possible therefore that valuations may not adequately reflect the post-Covid landscape.
It is encouraging to hear that the Government are now undertaking a more widescale review of the business rates system, which has undertaken a considerable amount of incremental change over the last 30 years. The recent Pandemic and the use of business rates as one of the arbiters of assistance to businesses has shown some of the discrepancies in the system.
The £10,000 grant available to those in benefit of Small Business Relief being one example, this only applied to businesses with a single property and within the criteria, and wasn't available to many small businesses who might, whilst still being small, operate from two or more sites. The definition of small business under the business rates system seems to be quite different from that used in other areas of legislation, whereby employers of less than 250 staff are often the definition.
Furthermore, with the rise of online retailing and home working, which have been particularly prevalent during lockdown, many large businesses can operate from relatively small accommodation, whereas some more traditional small businesses, with relatively low numbers of staff and low turnover, may be operating from business premises which do not qualify as small business premises.
Therefore, it is to be hoped that the review is wide ranging and brings the business rates system into the 21st Century.
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