UK government postpones business rates revaluation again
The UK government’s latest decision to postpone its business rates revaluation again has been criticised by property specialists who have once more called for fundamental reform of the system of property taxes.
They say it leaves businesses having to deal with out-of-date property valuations for longer at a time when property values have fallen due to the pandemic.
The government had originally postponed next year’s planned revaluation until 2022 and it’s now been put back until 2023.
Despite current pandemic-linked rates relief schemes, when they end it means businesses will still be paying rates based on property valuations from a time when retail was expanding and store rents and values were only ever going up. With current rates based on valuations from April 2015, they pre-date the post-Brexit-vote downturn, the acceleration of online shopping and this year’s coronavirus crisis.
On the plus side, new valuations will be based on the situation in April 2021 (rather than April 2019 as originally planned), which are likely to be lower than six years earlier.
Business rates are a huge burden for stores and can be the factor that tips them over the edge, as we saw earlier this year with department store chain Beales. While business rates relief is available, the complex rules can also mean some companies end up paying more than they should, which was the problem for Beales.
John Webber, Head of Business Rates at property specialist Colliers International, said: “While we understand why the government has taken this approach, given the impact of Covid-19 on values, we think there are issues that need to be considered”.
He thinks the values currently in the rating list should be reduced because of the effect of Covid-19. And he added that with a revaluation date of April 1 2021, “we will still be seeing values significantly impacted by Covid-19 and we doubt that the VOA will have sufficient evidence or expertise to arrive at correct figures. The lasting effects of Covid-19 will lead to a significant reduction in rental values at the [new] valuation date”.
This means the government will therefore potentially be faced with either “a significant reduction in the annual tax take of £26 billion, or, if they wish to maintain £26 billion of receipts, they will either have to increase the multiplier from the current level of 50p significantly or introduce another calamitous transitional relief scheme,” Webber said.
And he thinks this could give the government “the opportunity to recognise that the amount taken in business rates is excessive and unsustainable – and to reduce the multiplier accordingly. The likelihood is, however, that given the state of public finances by 2023 it is unlikely they will be able to afford to do this.”
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