Increase in business rate revaluations poses greater risks to councils

Increasing the frequency of business rate revaluations could increase the risk profile of local authorities, according to responses from the sector to a government consultation.
In his autumn statement last week, chancellor George Osborne announced a government review of the structure of business rates, “consistent with the government’s agreed financing of local authorities”, set to report by the 2016 Budget.
And this week, the Department for Communities and Local Government released the results of a consultation launched in April which revealed a schism between businesses and local authorities over the frequency of revaluations.
It said: “Just under half of respondents did not favour increasing the frequency of revaluations.
“These were mainly local authorities but also a significant minority of ratepayers with multiple properties, local business groups and rating agents.
“They argued that this could negatively impact on stability for both business and local authorities.”

However, the majority of business respondents argued that more frequent revaluations would make bills for firms more responsive to changes in market conditions.
There was no clear agreement from this group about how long the cycle – currently five years – should be. Three-yearly revaluation was the most popular option, with some favouring annual revaluations.
In its response to the consultation, London Councils, speaking on behalf of local authorities in the capital, voiced concerns that the government had not fully considered the potential impact of changes to revaluation cycle.
It said: “Increasing the frequency of revaluations would increase the level of uncertainty for local authorities, seriously hindering their ability to make robust medium term financial plans and risking their ability to benefit from local growth – one of the key principles underpinning the rates retention system.”

There was little evidence produced to support changing the method and timing of valuations, and little detail about how they would be implemented, it said.
In its response, the Local Government Association said that it would resist a more frequent revaluation cycle if it resulted in the number of business rates appeals increased.
“Since the implementation of business rates retention and the government’s decision that councils should bear 50% of the risk of backdated appeals this has become a significant risk issue for local government,” it said.
Local Government Information Unit associate Tom Lawrence said that tweaks to the national regime could “mean that local government is more dependent on central government for funding”.
He said: “For example, the last autumn statement contained a number of changes to reliefs, designed to help business.
“The government is compensating local authorities for the reduction in yield these have caused.”

Elsewhere, the consultation found virtually all respondents want to retain individual valuations for each property, rather than a banding or zoning approach.
“Many argued that less-individualised, ‘broad brush’ approaches…were likely to be less fair and would lead to more appeals,” said DCLG.
It also revealed that many ratepayers felt that bills were not well laid out, the calculation wasn’t clear and the format varied by local authority.
Some non-local authority respondents suggested that local government rates retention and financial pressures were making local authorities less willing and able to grant discretionary reliefs.

During the consultation, officials from HM Treasury, DCLG and the Valuation Office Agency (VOA) held more than 30 meetings with businesses and councils.
There were 217 written responses, around 100 each from local government and the private sector, with the remainder from think tanks and individuals.

Photo (cropped) by Peter Gorman