Unresolved business rates appeals siphon £2.5bn away from LAs

More than 130,000 business rate appeals from 2010 still remain unresolved, according to latest figures released by the Local Government Association.

In the past eight years, over a million businesses have challenged their business rates bills, but the latest figures show that 133,060 appeals have yet to be ruled on.

The LGA is highlighting this latest statistic as, although councils do not get involved in challenges made by businesses, its member LA’s must set money aside pending appeal decisions.

Over the last five years, the LGA says that £2.5bn has been diverted away from local services to cover the risk of business rates appeals as they have to fund half of the cost of any backdated refunds. This means hundreds of millions of pounds are left “in limbo” serving no other purpose than being an insurance policy should the council be asked to pay back business rates following successful appeals.

There was a recent debate in Westminster where the LGA called on the Government to take the financial risk from business rates away from local government. They argued that Government policy allowing councils to keep more of the business rates also means they take on more of the risk if they then become liable to pay back even more of the cost of any backdated refunds.

Like Scotland, England council leaders want to see a time limit for appeals, except in exceptional circumstances. Scotland currently has a six-month time limit for businesses to appeal their valuation.

Cllr. John Fuller, Vice Chair of the LGA’s Resources Board says that ongoing delays in tackling business rate appeals were heaping further financial uncertainty and pressure on LAs at a time when “every penny counts” to give councils the best chance of protecting services over the next few years.

He added that it was right that a business was able to challenge its valuation if they genuinely believe it to be wrong, but he believed the present system was completely unfair.

And with local government in England facing an overall projected funding gap that will exceed £5bn by 2020, it is easy to see why his members are becoming more and more concerned over the backlog of business rate appeals that are still to be resolved.

It must be good news in some small way then for LGA members that current appeals in the new Check Challenge Appeal system have dropped by 90% in the first full year since its introduction. This, however, has no bearing on historic appeals that are still outstanding with the VOA and their potential impact on LAs.