Chancellor freezes UBR for 2022/23 and provides a 50% discount for smaller retail hospitality and leisure operators. Fundamental business rates review concludes with move to 3 yearly revaluations from 2023 together with new reliefs for “green technology” and “improvements” to buildings.
The Chancellor has announced a number of business rates measures in his Autumn Budget and despite leaks to the contrary has also published the Government’s conclusions following the call for evidence as part of the fundamental review of business rates issued last year.
There were five key statements included in the budget announcement this afternoon and included within the response to the fundamental review as follows:
Freezing UBR for 2022/23
As widely anticipated the Chancellor has confirmed that the UBR for 2022/23 will again be frozen. This is a measure that we have been calling for particularly following the announcement of the September CPI figures at 3.1% last week. The UBR in England for 2022/23 will therefore remain at 49.9p for small properties and 51.2p for large properties with an RV of £51,000 or more.
Retail Hospitality and Leisure Relief for 2022/23
In a response to calls from businesses in the sector the Chancellor confirmed that the relief scheme for occupiers of properties in the retail, hospitality and leisure sectors will continue into the 2022/23 rate year at a discount of 50%, reduced from 66% in 2021/22. However, the cap next year will be limited to £110,000 per business (from £2m in 2021/22) which means that many occupiers of larger or multiple properties will not benefit from relief for large parts of their portfolios.
New Reliefs / Exemptions announced from 2023
Exemption for Green Technology
Included in the budget and detailed in the Business Rates Review Final Report is confirmation that the government will introduce a rates exemption for eligible plant and machinery used in onsite renewable energy generation and storage, such as rooftop solar panels and battery storage used with renewables and electric vehicle charging points, from 2023 until 2035. A 100% relief will also be provided for eligible low-carbon heat networks that have their own rates bill.
Relief for Building Improvements
The Chancellor also announced a 100% improvement relief, providing 12 months relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. This is intended to support businesses “to make improvements to their property such as adding more rooms to a hotel, expanding a factory, or installing CCTV or bike sheds”.
Again this will not be introduced until 2023 and the government will consult on how to implement this relief, which it then intends to review in 2028.
Both of the above schemes refer to “eligible” improvements and we will update further as more detail or consultation is issued.
Transitional Relief for 2022/23
The government has confirmed an extension to the 2017 revaluation transitional scheme for the 2022/23 year limiting increases in liability for occupiers of small properties up to RV £20,000 to 15% and medium sized properties up to RV £100,000 by 25%. These will only impact a relatively modest number of properties whose liability increases are still being phased in following the 2017 revaluation.
Revaluation Frequency
Following on from the recent consultation on revaluation frequency the Chancellor confirmed that from 1st April 2023 we will be moving to a 3 yearly revaluation cycle.
Other key points from Fundamental Review Conclusions
Disappointingly, the key conclusions to the fundamental review look at short term adjustments to the system rather than the “fundamental” longer term review that was hoped for. The conclusions are that there is no need for drastic reform but that changes should be made to make the system fairer and more responsive. The Government has considered the arguments for an online sales tax but does not consider at this stage that such changes would allow for a significant cut in the business rate burden. It does intend to consult about a possible online sales tax and the review makes clear that, if implemented, revenue from an online tax would be used to reduce business rates for retail premises.
In addition to detailing the measures announced in the budget the Final Report includes a road map of the journey to more regular revaluations and details a number of changes which it intends to make by 2026.
We are particularly disappointed that at this stage the Government has ruled out a move to a shorter gap between the Antecedent Valuation Date (AVD) and Revaluation date which currently stands at two years and where businesses have been calling for a one year gap in order that the benefit of more regular revaluations can truly be felt. As feared such a move has been pushed well into the future and certainly not in time for the 2026 revaluation.
Steps Required to Move to a Three Yearly Cycle
Following on from the consultation on revaluation frequency earlier this year the conclusion document sets out the steps that will be implemented to support this change:
New Notification Requirements and Compliance Regime
Ratepayers will be required to notify the VOA of changes to the occupier or physical property characteristics, and to provide rent and lease information to the VOA, as well as trade information used for valuation.
These changes, which are subject to further technical consultation are intended to help increase the quantity and quality of information provided to the VOA. Following concerns raised in the consultation responses the Government “will look to ensure that ratepayers can engage with these duties in a light touch and minimally burdensome way”. These duties will be phased-in during the course of the 2023 list and we await more detail.
The Government advises that a “fair and proportionate” compliance regime will be introduced. This will include penalties for non-compliance, including provision of false information as well as failure to comply with a “light touch” annual confirmation requirement. Initial entry to the appeals system and phase 2 of transparency (see below) will also be made conditional on compliance with the duties.
Removal of the Check Stage
In order to simplify and speed up the appeals process, the Check stage will be removed from Check, Challenge, Appeal from the outset of the 2026 list but will remain in place for the 2023 revaluation. This phasing-in will allow time for the new duties, which replace the functionality of Check, to be introduced and for ratepayers to become familiar with them.
New 3 month Time Limit for Challenges from 2026
To ensure that all Challenges can be cleared within the life of the list, a 3-month window for submission of Challenges will be introduced. The Challenge window will be introduced at the outset of the 2026 list, and will not be employed for the 2023 list
This was one of the more controversial elements of the consultation on revaluation frequency and without wider changes to the challenge process this will place an unfair burden on ratepayers.
Statutory Deadline for VOA to Resolve Challenges
From the 2026 list, the end of each list will be set as the statutory deadline for the VOA to resolve Challenges (except those arising from changes between revaluations), helping to ensure that Challenges are resolved within the life of each list, rather than overrunning into subsequent lists, as is currently common.
Material Change of Circumstances
To ensure that the Material Changes of Circumstances (MCC) provision remains fit for purpose, and that usage remains within the original intentions of the provision, the government will legislate to clarify that factors arising from legislation, regulations, licensing changes, or guidance are not in scope for MCC claims. Reflecting responses to the consultation, the government will not restrict MCC claims any more widely than the above areas at this time.
This measure follows on from the ongoing legislation to rule out the impact of Covid 19 MCC appeals.
Greater Transparency
To provide greater transparency on valuations, meeting an important stakeholder ask, the government will introduce increased transparency in two phases (timings are indicative, and subject to change):
Transitional Scheme
There were wide calls from businesses to remove transition and in particular downwards transitional adjustments going forward. In the conclusions the Government acknowledged these calls but considers that a transitional scheme should be maintained going forward albeit with further consultation during 2022.
Covid 19 MCC Legislation
The legislation to rule out the possibility of rateable value reductions in England and Wales as a result of material changes of circumstances linked to Coronavirus continues to progress through parliament.
The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill
The bill completed its Second Reading in the House of Lords last week but as anticipated the Government has still not issued any detail regarding the additional £1.5 billion relief fund for businesses which have not benefited from the rates holiday. We are continuing in our campaign to persuade the Government to bring forward the guidance on the fund and to consider increasing the pot in so that all those businesses that need help will benefit adequately but in the current fiscal climate we fear that change is unlikely.
The Scottish Government have issued their own draft legislation the Valuation and Rating (Coronavirus) (Scotland) Order 2021 which is intended to have a similar effect as is in England and Wales.
Scotland
The Scottish Government has issued consultation regarding proposed changes to the appeal system in Scotland from 2023. There are some significant changes proposed, with responses are to be submitted by 15th December, https://consult.gov.scot/local-government-and-communities/non-domestic-rates-processes.
The suggestion is to introduce a two stage appeal process with draft values being published by the 30 November in the year prior to the revaluation year and all proposals to be submitted no later than 31 July in the revaluation year or 4 months from the date of a change. The requirements at proposal stage sound very similar to the Challenge stage adopted in England and will need to include detailed grounds of appeal, supporting evidence and an indication as to how the proposer wishes the assessor to alter the entry in the valuation roll, including, where relevant, the altered rateable value sought. If there is no agreement after the proposal stage is reached the case becomes an appeal and will be heard in the new Valuation Tribunals (see below) which replace Valuation Appeal Committees. A fee may become payable to the Courts at this stage.
We are currently reviewing these and will be making a detailed submission to the Scottish Government. We can assist you if also wish to submit a response.
Valuation Tribunals
There is also a consultation underway in respect of the proposals to transfer the Valuation Appeal Committee to a Tribunal system from 1 January 2023. The consultation exercise on the Scottish Statutory Instruments required to facilitate the transfer of the VACs can be found here – https://consult.gov.scot/justice/local-taxation-vac-etc-transfer-of-functions.
Assessor Information Notices
The Scottish Assessors are now issuing Information Notices to obtain information in preparation for the 2023 Revaluation which will be based on a tone date of 1st April 2022. It is therefore imperative that any notice received is directed to the appropriate person within your organisation and acted on within the statutory time limit.
We detailed these in our update back in our February 2020 update and here is a reminder of the penalties for failure to return information when requested:
Northern Ireland Revaluation
LPS announced earlier this month that they will be issuing Requests for Information from ratepayers for the Northern Ireland 2023 Revaluation:
An online code or paper questionnaire (depending on property type) will be issued by post. Further information can be found at:
NI Reval2023: Rebalancing business rates | Department of Finance (finance-ni.gov.uk)
The valuation date is 1 October 2021 and the deadline for completed returns is 31 December 2021.
Under Article 59 of the Rates Order there is provision to require information for valuation list purposes and under Article 60 of the order those that are convicted of an offence by not responding can be subject to fines of up to £1,000 with possible further daily fines for a continued failure to respond.
We are reviewing the detail of the budget and fundamental review conclusions and will provide further updates in due course.
In the meantime we are here to discuss any specific issues regarding your properties and will keep you informed of further development regarding business rates across the UK.
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