Business Rates

Occupiers face new fines as part of VOA modernisation

October’s Fundamental Review of Business Rates announced a new obligation for owners and occupiers to inform the Valuation Office Agency of physical property and occupation changes as well as enhanced requirements to provide rent/lease information. This is a huge change from the present; there is currently no statutory obligation for owners or occupiers to provide any information to anyone– the burden lies entirely with the VOA to maintain the rating list and council to identify occupiers.

The driver behind this is the hope that increased quantity and quality of information will help the VOA get Rateable Values right first time, remove the current Check stage of the three-stage appeal system, which is just there to confirm facts and allow ratepayers to go straight to Challenges stage in the instances where their valuations are wrong. Great sentiments.

The Review set out that this new obligation would be achieved in a “light touch and minimally burdensome way”, with an annual confirmation statement that would bring business rates in line with other taxes where annual self-reporting is commonplace. A “Fair and Proportionate” compliance regime would be introduced with fines for providing incorrect information or failing to comply at all. Again, great sentiments that I’m sure the vast majority of ratepayers wouldn’t have a problem with.

In the period between 27 October 2021 and the beginning of January 2022, this light touch, minimally burdensome requirement has grown faster than Boris’ lockdown party list.

In a recent presentation to members of the rating profession, Liz Ratcliff of the VOA set out that changes to rental or receipts/profit info must be provided within 30 days with a variable starting point for fines of between £300 and £900, based on RV plus £60 per day for ongoing non-compliance. To put this in perspective you will have 30 days to inform the VO of a rent review settlement, lease renewal, stepped rent increment or a planned RPI increase in a lease.

Fail to provide details of a property alteration or occupation change? Incur a fine of 2% of RV subject to a minimum of £300. Again to give this some context, failing to tell the VO you have moved into, or out of, a property with £100,000 RV would produce a £2,000 fine.

I’m all for improving efficiencies in the rating system but how are the VOA going to deal with the tsunami of information? A robust web-based interface might well be able to deal with information capture but how will that information then be disseminated and used by the VOA who will also have a duty to inform local authorities of ratepayer changes?

The level of detail required is also problematic to occupiers. When the VOA were asked if they expected an occupier to remeasure, say, a shop after undertaking works, then the answer was “yes, and they would have to calculate the correct Zone A etc”. Is that really a light touch?

One thing is clear: the vast number of improvements and alterations that haven’t been picked up by the VO over previous rating lists will produce some dramatically increased RVs. I can think of numerous instances, including 100,000 sqft of warehouse extension and entire office buildings that have been missed by the VOA and there is currently no statutory requirement or financial benefit in the occupier coming clean.

The burden will start being introduced in circa 14 months which at least gives occupiers time to work out how they will manage this onerous, continuous supply of information and establish whether they’re facing substantial increases by divulging existing improvements that the VOA are unaware of.

A Major issue to consider is – do all occupiers really know the facts upon which their existing Rateable Value is based? Easy if it’s a single building but there are thousands of large complex sites where the line-by-line breakdown on the summary valuation doesn’t align with what’s physically on site. And what of those valuations based on contractors or profits methods where it’s unclear what the current facts are? How do you report a change if you can’t clearly establish the baseline?

We will have a software solution in place to manage the capture and supply of information, so if you would like to discuss how we can help you reduce the burden of this burden, then please get in touch!

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