Business rates ‘bombshell’ could worsen appeals backlog
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A new “bombshell” addition in proposed changes to the business rates appeals system risks increasing — rather than reducing — the burden on local authorities, according to a ratings expert.
The Department for Communities and Local Government this week published draft regulations to introduce a new system in an attempt to reduce the backlog of 300,000 outstanding appeals.
But the document included a new clause — not included in a previous draft — which experts say would widen the scope for the Valuation Tribunal for England (VTE) to reject challenges to valuations.
A document released by DCLG alongside the draft regulations said: “The government…proposes that the VTE, in considering an appeal, should order a change in the rateable value only where their view is that the valuation is outside the bounds of reasonable professional judgement.
“In cases where the VTE consider the extant valuation is within the bounds of reasonable professional judgement, no change will be made to the valuation.”
One expert on business rates legislation told Room151: “This new clause introduces a new test of the definition of the word ‘inaccurate’.
“At the moment, inaccurate can mean as little as a penny. The new definition seems to raise the threshold for claims.”
John Webber, head of ratings at property consultancy Colliers, said that the insertion of the new definition could lead to more challenges ending up with an appeal to the Upper Tribunal.
He said: “This is a bombshell. It didn’t appear in any of the previous consultations over the past 18 months.
“Valuations can vary between 10% and 20% within the bounds of reasonable judgement. This is saying your rates bill could be 20% higher than you think it should be and it doesn’t matter.
“That is bad enough for a ratepayer. For a local authority it will mean a flurry of appeals come in before the new rules are introduced.
“After that, more challenges will end up at appeals. The initial Valuation Office Agency will just fold its arms at the first stage.
“Some mandarin in Whitehall has dreamt this up to try to reduce the number of challenges but it will have the opposite effect.”
He predicted that the new clause would “antagonise larger business rate payers” and that they could launch a legal challenge.
A spokesperson for the Chartered Institute of Public Finance and Accountancy said: “It’s crucial that amid the noise and clamour of party political tussles and the Brexit fallout, plans to rejuvenate local government finances do not fall by the wayside.
“The move to 100% business rates retention represents more than just a step-change in council funding, but is an important plank in the broader devolution agenda.
“This consultation on the draft regulations requires practitioners to really examine the detail and wording, as many legal challenges of the future will have its roots in this regulation.”
