UK businesses oppose government’s rates reform

Andy jalil – –

Businesses and industry groups as well as retail and cultural sectors have stepped up their opposition to key part of government reform. Thirteen business groups and industry associations including the Confederation of British Industry, British Chamber of Commerce and British Retail Consortium have formed a united front to fight the government’s proposed changes to business rates.
Commercial property taxes have been re-evaluated for the first time in seven years and are set to soar for many firms across the capital from April 1. The government is also changing the mechanism by which businesses appeal against its valuation. It is proposed a “reasonable professional judgement” provision in draft regulations reforming business rates, due to go before parliament before April.
This would mean that rate payers would not be allowed to appeal an incorrect business rates valuation if it were inside a “reasonable margin” of error. The reforms, which would come into force from April if approved, could see major firms left overpaying on their rate bills and unable to challenge them. But advisers at Cushman & Wakefield, Daniel Watney and Gerald Eve have argued in a letter to the government, that officials have not defined what is “reasonable”.
In addition, they say the Local Government Finance Act 1988 does not permit the government to ban appeals on the basis of disputed accuracy. Trade bodies representing retailers, SMEs and pubs have signed, the letter, penned by law firm Berwin Leighton Paisner, which questions the legality of the proposed changes. They have demanded that the offending clause be taken out of the new regulations.
Head of rating at Colliers International, John Webber, said an “unchallengeable” error in business rates valuations would “pile tens of millions of pounds on to the business rates bill”. Adding: “At a time when many firms, particularly in London and the south east, can expect their bills to skyrocket, this adds insult to injury”. A government spokesman said: “These claims are simply false. We are not preventing anyone from appealing their bills, or setting any margin of error for appeals being heard.”
He went on to say: “We are reforming the appeals process to make it easier for businesses to check, challenge and appeal their bills, while at the same time generous business rates reliefs mean thousands more businesses are seeing a reduction. From April, 600,000 businesses will pay no rates at all.” But because business rates are tied to the rental valuations, and as rents have jumped in London over the last seven years, firms in the capital are being hit particularly hard.
The rates reform will also hit parts of the entertainment industry as London, a world centre for theatre, will see its theatres being forced to pay an estimated £31 million in property taxes over the next five years once the government’s planned hikes comes into effect. The total rates bill for theatres in the capital city will rise by nearly 40 per cent to £6.3 million for the 2017 to 2018 year alone.
Overall, businesses across the capital will see taxes jump up by up to £9.38 billion over the five-year period. London Mayor Sadiq Khan has called for the capital to have power over how business rates are set, and how relief is given to smaller businesses. The mayor’s finance commission has warned that thousands of employers are at risk from the rate hike. Mark Rigby of business rates specialists CVS said: “A system which works better and more efficiently for businesses in London could not be more important.”
The government only published details of the re-evaluation in September, giving businesses just six months to plan for the tax rises. The New West End Company, a lobby group for the West End — a major retail area — has warned that the dramatic tax changes could lead to job losses and reduced investment for the capital’s retailers. Additionally, shops are contending with a dramatic increase in labour costs due to the implementation of the national living wage.
The British Retail Consortium has told chancellor Philip Hammond that property taxes are now a “disproportionate burden” to businesses and are unsustainable. In 1990, business rates were set at a third of the rental value of a property. These days companies pay roughly half the rental value of the property they occupy in extra taxes.