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Fundamental Changes to Business Rates: Non-Domestic Rating Bill 2023

At the time of writing the Non Domestic Rating Bill 2023 is progressing through parliament. We examine the headlines from this Bill which is set to result in one of the largest fundamental changes to the property tax that is Business Rates. It is evident to date that few ratepayers are aware of these proposed changes in England, so the intention of this blog post is to identify what’s proposed and importantly how this impacts ratepayers once the Bill is passed.

Revaluation Period and Appeal Window

This has been an area of huge contention over the past two decades whereby the length of rating list has resulted in significant unfairness to ratepayers. The 2000 and 2005 rating lists were for a duration of 5 years, the 2010 rating list lasted 7 years and the most recent 2017 rating list was for a 6-year period. The Bill has committed to the shortening of these revaluation periods, and from 2023 onwards the cycle “should” not extend beyond 3 years.

ForeView Co-Founder Philip Legg comments:

”There will always be winners and losers from any revaluation, however, the fundamentals are that the shorter the revaluation cycle, the more aligned Business Rates can be with the wider commercial property market. That said, even with a 3-year cycle, you would find at the end of the final year of that list that Rateable Values are calculated based on a antecedent valuation date (AVD) that existed some 5 years previous. A lot can happen and change in the commercial property market over a 5-year period as recent history dictates”.

A further important aspect of the proposals made in the Bill is that of the “appeals” process. It proposing to remove the current three stage Check, Challenge, Appeal process in return for a two staged Challenge and Appeal process effective from 1 April 2026. Furthermore, the introduction of a 3 month Challenge window is proposed to come into effect from the start of the 2026 rating list. 

The introduction of a shortened challenge window means ratepayers need to proactively manage their business rates responsibilities to ensure their position in maximising savings opportunities are available. Partnering with a professionally accredited rating advisor well in advance of the 2026 rating list will enable the opportunity for ratepayers to explore the potential for minimising their liability for the three rate years that follow.

Ratepayer Compliance

The greatest fundamental change proposed in the 2023 Bill is on the matter of compliance. To allow for more frequent revaluations, a significant burden is being placed on ratepayers through the obligation to follow a new compliance regime.

The three obligations that fall to ratepayers are as follows:

  • Annual Compliance Return – ratepayers will have an annual duty to notify the VOA that the data they hold is correct within a period of 60 days post 1 April each year. Much like other tax returns these are to be filed through an online portal.
  • Notifiable Events – ratepayers will have a duty to notify the VOA of any changes to their property, changes to tenancy information, changes to the use of the property and any changes to trade information (in examples where valuations rely upon trade data….pubs, hotels, visitor attractions etc). Importantly, any changes of this nature are to be communicated to the VOA within 60 days of the said event.
  • New Ratepayer Notification – ratepayers will have an obligation to provide HMRC with their unique taxpayer reference number within 60 days of becoming liable for a new property.

In order to police these three new obligations, ratepayers will face penalties in the event they fail to comply or indeed if false information is provided. The level of penalties charged for failure can be as much as 3% of Rateable Value plus late payment at £60 per day.

The burden created by this compliance regime means that ratepayers should partner with a professional representative such as ForeView in order to ensure these requirements are fulfilled on an ongoing basis and any risk of penalty fines for non-compliance are extinguished. The details of the platform that the VOA and HMRC are due to operate compliance from are yet to be confirmed but at this stage its apparent that ratepayers need to start making consideration around how this required data is stored particularly where they’re ratepayers on multiple sites. It will be the ratepayers duty to ensure the effective transfer of the required data through whatever platform / portal is chosen by HMRC and the VOA.

If a ratepayer is confirmed to have fully complied, then the VOA are committed to providing full disclosure of the comparables they have relied upon in assessing the level of Rateable Value adopted. The request for this information will be made available to ratepayers and their agents in advance of having to commence the “appeals” process on the 2026 rating list.

Ben Nelson, ForeView Co-Founder comments:

”This signifies the greatest change to the way in which Business Rates are administered by the VOA. As with other taxes, ratepayers should remove the risk of non-compliance through partnering with a rating surveyor very much like other tax responsibilities that are administered through their accountants. The upshot of this compliance regime should be that Rateable Values become more accurate into the future with the VOA having access to greater volumes of data surrounding an individual property, lets watch this space. Furthermore, ratepayers should consult with their rating professional prior to property changes taking place to ensure risk management and budgeting is factored into the overall project plan”.     

New Reliefs

New reliefs opportunities are to be made available to ratepayers moving forward. Improvement rate relief will be available to ratepayers effective from 1 April 2024 which covers improvements made to properties they occupy which in turn would result in an increased rateable Value. This relief is aimed at light programmes of work where the ratepayer remains in occupation throughout the improvement project. If the works qualify for the relief, then the ratepayer would benefit from 12 months (from completion) of not having to pay the increase in Rateable Value attributed to the said improvement.

In addition to improvement relief, ratepayers can also benefit from a 100% exemption to plant and machinery that’s used in the creation of renewable energy generation such as solar panels and vehicle charging points. This exemption has been available since 1 April 2022 and lasts at least until 31 March 2035.

ForeView Co-Founder Philip Legg comments:

”With any proposed works to a property we advise ratepayers to liaise with their rating advisor from the outset in order to maximise any potential for securing reliefs through the council or removal of the rates assessment from the rating list. The availability of these additional reliefs speaks to the fact that ratepayers and their agents near to form closer collaborative relationships in order to maximise savings opportunities and to align budgeting real-time.”

Material Change of Circumstances (MCCs)

In response to the onslaught of Covid MCC appeals that the VOA received, the government have clarified the circumstances constituting an MCC. With effect from 1 April 2023 onwards the following will not constitute an MCC:

  • Changes to legislation
  • Changes to licensing regimes
  • Advice or guidance issued by a public authority on how a property should be used
 

The following reasons still constitute a valid reason for making an MCC challenge:

  • A physical change to the property or locality
  • A property joining or leaving the categories ‘domestic’ or ‘exempt’
  • The property forming or no longer being a unit of property for business rates

 

Discretionary Relief Powers and the Uniform Business Rate

The Bill proposes to remove the constraint on local authorities from issuing retrospective discretionary relief awards. Currently they are precluded from issuing retrospective reliefs following a period of 6 months after the close of each financial year.

 

The UBR will now by increased inline with the CPI rather than that of RPI and the new multiplier will not have to be set until February of the preceding rate year.

 

Budgeting and risk management is at the core of what ForeView offer and advise to their client base. With changing legislation and government announced relief packages its paramount that ratepayers are in regular communication with their advisor to ensure informed decision making.

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