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The future of business rates

This year, the government released its long-awaited business rates final report. Given the widespread implications of the report, Place North West felt it was important to bring it back to the forefront.

We reached out to business rates experts Richard Roberts, principal director of Roberts Vain Wilshaw, and Ryan Jones, head of rating in the North at Cluttons, to find out what the key takeaways are from the report and what they mean for 2022 and beyond.

Temporary 50% hospitality and retail relief

This deal is not as great as it sounds, with the government implementing a cash cap of £110,000 per business – not per property.

“It seems to protect small businesses and individual businesses that don’t have large or multiple sites,” Roberts said. “But anybody who has more than one location with a relatively modest rate of £100,000 will hit that £110,000 number almost immediately.”

Roberts predicts a cascade of failures across the high street if nothing is done, as many shops are already struggling to compete in a world of supply and staff shortages and to recover from the lingering impacts of Covid.

“The damage to our high street could be massive,” Roberts said.

Jones agreed. “It’s a headline grabber,” he said of the relief announcement. “But if you look at some of the larger retailers, it’s just a drop in the ocean.”

Not a saving grace

While the report is a step in the right direction, Roberts is not optimistic it will be enough to rescue high street retail.

“The high street has been on life support for a long time,” Roberts said. “Covid hastened the demise of a lot of these physical retailers and it’s impossible to stem the tide.

“There is nothing we can do to return people to shopping on the high street unless there’s widescale change,” he continued. “They need to become places people live, work and socialise in order to be revitalised.”

Roberts is not advocating for complete rate relief though.

“Continuing to put a band aid in the form of 100% rates relief is also the wrong thing to do, because the high streets do need to change and adapt,” Roberts said.

He argued that the government’s decisions to only offer temporary support with the £110,000 cap is “removing the life support that would have allowed retailers an the high street the time to adapt.”

Three-year rating revaluations starting in April 2023

This is a welcome change, according to Roberts and Jones. But it comes with a catch. The rateable values will be set two years prior. While this is a step in the right direction, it is still problematic for businesses.

“You still have a two-year gap between what the market is doing and when the rating revaluation comes in,” Jones said.

Transitional relief extension

Transitional relief limits the increase or decrease in rates liability between revaluations, so that if a rateable value falls by 50%, then the reduction rates liability may only decrease by 10%, according to Jones.

While the reverse could be great for businesses that see their rateable value rise, it could mean delayed relief for the businesses that have their value cut. Those businesses may be struggling and would need a dramatic and immediate reduction in relief rather than a phased one.

Three-month windows for challenges in 2026

Starting in April 2026, ratepayer’s will only have three months to challenge their rateable value.

“For occupiers of multiple properties, this will be some task,” said Jones. “It’s a very narrow window.”

To make the challenge as easy as possible, Jones said it will be important for ratepayers to assemble all possible evidence in advance so that they can file their challenge as quickly as possible.

Ratepayers need to notify the valuation office of changes to their property.

This is a new requirement, and quite a big shift for many companies which have not had to keep the valuation office in the loop.

There’s another aspect of this too.

“Another piece of legislation that’s quietly come in requires local authorities to provide a quarterly dump of data to HMRC which will feed through to the evaluation office and that will provide the evaluation office information of where the occupier has changed, which allows them to be more targeted about their rental evidence collection,” Roberts said.

“So they’re putting a number of checks and balances in place that actually seem quite sensible.”

However, these checks require business and property owners to be on top of their data and for them to know exactly what to give the valuation office and when.

For most of these takeaways from the fundamental review it is clear that accuracy will be the name of the game. Both Roberts and Jones advise getting professional advice to make sure everything is as correct as possible, and to ensure the current valuation is right, that you’re getting the reliefs you’re entitled to and that any future concerns are mitigated.

“I think it’s more important now and going forward that all angles are covered,” Jones said.

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