Business Rates

Non-Domestic Rating Act: your responsibilities explained

Back in June, I reported on the Non-Domestic Rating Bill  – the contents were so substantial that it took two instalments to cover it all. The Bill has now become the Non-Domestic Rating Act and while some parts have been watered down the changes represent the most significant overhaul of business rates in decades. But will it make a difference to most businesses? The honest answer to that is yes – both in terms of an administrative burden and the likelihood of an ultimately increased tax burden. Stick with this – if you have a business this Act will affect you.

The changes will be subject to staggered implementation but heading things up is the move to three yearly revaluations. The next rating list will be 1 April 2026 with a valuation date of 1 April 2024 – only 5 short months away!

The imminent change is that from 1 April 2024 Improvement Relief will provide 100% rates relief on new improvements that are completed after 1 April 2024 and before 31 May 2028. The aim is to help occupiers make improvements to their existing premises. The idea in itself is something of a misnomer – occupiers make improvements to their properties because they need extra space or need to incorporate process improvements. Business rates liability is rarely given anything other than a passing though and a year’s ‘rates free’ is unlikely to have a material impact on the decision to proceed.

The regulations are still in draft form but there are two conditional elements:

  • Qualifying Works – the floor area must increase or ‘otherwise improve the physical state’ or add to its rateable plant and machinery. Newly constructed properties nor refurbished properties that have been deleted from the rating list during works will qualify. A change of use alone or the addition of land also will not qualify.
  • The Occupation Condition – the same ratepayer has to be in occupation since the works commenced to ensure that support is not diverted to landlords, developers or businesses which have inherited improvements from a previous occupier.

The mechanism for calculating the amount of relief and the effective date will sit with the Valuation Office Agency (VO) who will provide a certificate of the amount associated with the improvements which will exclude other non-qualifying property changes. What constitutes completion for rating purposes is typically different to practical completion from a contractual perspective and I can already see how this could be contentious. Occupiers with plans to complete work in the run-up to April should talk to us about this ASAP.

There will also be relief on heat networks and removal of the time restrictions affecting when councils can issue discretionary relief. Following in the footsteps of legislation to prevent covid leading to reduced rateable value, the government have now added a broad brush that stops changes in legislation, licensing regimes and guidance from public bodies having an impact on rateable value between revaluations.

The most significant changes have been deferred, for a little while at least, as a revised IT system is required to implement.

Information sharing – it sounds quite simple and innocuous but the implications and impact on the rating system are massive. To support the ability of the VO to provide more frequent revaluations, all ratepayers will have a statutory duty to provide information to the VO about themselves, their property, and their business. This represents a paradigm shift in reporting requirements – in the past, it has been down to the VO and council to identify changes with no onus or responsibility on the ratepayer, other than to complete the occasional sporadic rent return form.

The new legislation requires ratepayers – which will include occupiers of freehold and leasehold properties, plus landlords of vacant properties, to notify the VO of property and occupation changes within 60 days of them occurring. Install a mezzanine? Tell the VO. Refurbish an office? Tell the VO. Rent review/lease renewal agreed? Tell the VO. At the end of all this reporting, there will then be an annual confirmation statement, completed within 60 days of 30th April each year, to confirm that you have told them everything and that what you have told them is correct. Failure to do so would result in fines for non-compliance. The new Improvement Relief outlined above will remove the first year’s increase in liability.

But what happens if there are historic alterations that haven’t been picked up on? The reporting requirements relate to changes from the point of implementation – I can’t see how this could be before 1 April 2024 due to the requirements for a new web portal so maybe 1 April 2025. We have clients who have underassessed properties ranging from extensions to missing yards, mezzanines and offices. Some of these changes go back many many years and will remain outside of the reporting requirements until another change elsewhere triggers a reportable event which would then in turn trigger a VO inspection that would lead to the identification of the previously missed improvements. The old improvement wouldn’t benefit from the 12-month improvement relief and could be backdated. Tactically there are ways to deal with this to minimize risk and potentially manage any increase to ensure it’s right the first time – rather than entering an endless loop of Check Challenge Appeal action to fix the value and effective date of VO increases.

The new legislation goes even further and will require the linking of tax information to property data as ratepayers will be required to provide HMRC with a taxpayer reference number submitted through the new rating ‘Super Portal’. The government have at least learnt its lessons from past IT blunders and mandatory introduction will follow a soft launch and an extensive public information campaign. Fundamentally the changes are there to facilitate more frequent revaluations, make sure that rateable values accurately identify and include any alterations to a property and reduce the opportunities for the widespread misuse of relief. This all amounts to the biggest shake-up in business rates ever and changes it from a subject that most businesses think about once every revaluation, into a live issue requiring ongoing attention where there are any changes. The burden of annual confirmation statements alone across large portfolios is a significant one, but whatever the size of your portfolio our advice to avoid nasty surprises, is to get a handle on it now and establish whether what you’ve got matches what the VO think you have.

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