With the announcement of its call for evidence for a fundamental review of business rates, the Treasury has put back the next business rates revaluation to 2023.
This confirmation of a two-year delay to the next business rates revaluation does, however, highlight the uncertainties businesses in the UK now face.
Will a 2023 revaluation be able to address these uncertainties?
Announcement of April 2023 Rates Revaluation
The date that the Government has now confirmed for the next business rates revaluation is 1 April 2023.
Earlier, in May, there was an announcement of a postponement, but with no confirmed date.
There had been an assumption that the delay would be at least until 2022, but this latest announcement adds a further year.
The thinking behind this announcement is that a delay until 2023 will give the Government time to properly assess the impact of Covid-19 and to make necessary changes to the business rates system.
Call for Evidence for Business Rates Review
The Government’s call for evidence is seeking views on how the business rates system currently works.
This reflects its stated commitment to conduct a fundamental review of business rates, and to look at ideas for alternative taxes.
It is looking for responses to its Business Rates Review in two phases:
- On the multiplier and reliefs sections by 18 September, and
- On the remainder by 31 October.
The consultation will look in detail at key aspects of the business rates system, including:
- Reliefs including small business rates relief and mandatory relief
- The business rates multiplier
- Valuations process, frequency & methods, transitional relief (phasing) and Plant and Machinery values
- Administration of the business rates system, including appeals, accuracy, billing and how transparent valuations are
- Alternatives to business rates, such as capital values tax (CVT) and online sales tax.
The stated objectives of the review are to reduce the overall burden on business, improve how the current system works and consider what fundamental changes the Government could make in both the medium and long term.
In the meantime, some businesses will be eligible for a business rates holiday for the 2020-21 tax year.
But what will form the basis of the postponed 2023 Valuation?
Why 2021 Property Values Will Be Critical
The 2023 business rates revaluation will be based on property values as of 1 April 2021.
Generally, there has been a positive reaction to the announcement confirming the postponement date from property and retail experts.
The idea is that this will better reflect the impact of Covid-19, but there are still pressing issues and questions around this:
- What impact, if any, will the findings of the Business Rates Review have on the revaluation?
- Will the revaluation reflect potential long-term changes in the nature of the commercial property market as a result of Covid-19?
The challenge to businesses is one of facing uncertainties.
No one knows how the pandemic will play out in the forthcoming months, or even years, or what property values will look like as at 1 April 2021.
Long-term Impact of Covid-19 on Business
While the Government is hoping for a significant return to normality from November 2020 at the earliest, it is unclear whether this will happen.
For example, what would the impact of permanent home-working have on office rental markets?
Can many retailers, restaurants and pubs survive for very long on much-reduced margins?
This is against a background where many of the country’s high streets were already struggling to survive before the pandemic and lockdown.
Rating List Values
There have been thousands of Material Change of Circumstances appeals to the VOA, but does Covid-19 count as a valid justification for a temporary revaluation?
While Government has been providing business rates holidays in response to the pandemic, the bigger question is how it responds to the long-term economic impact.
If the 2023 business rates revaluation does not address this, then it will fail, and may even risk dealing a killer blow to those businesses that survive the pandemic.
There are also big questions over the levels of value in April 2021 and whether this will increase or decrease assessments from their current levels; assuming business rates remains on the same broad valuation methodology.
But what is much more critical to many businesses leading up to 2023 is what happens to business rates between now and then.
For more information about business rates and how they affect your business, please contact our team.