The fundamental review of business rates has now been concluded by the Government and the final report details key changes to the current rating system. For a long time, there have been calls to overhaul the business rates system with a push from key stakeholders for a ‘fairer and simpler’ system. The review, however, confirms the importance of business rates as a tax within the wider system and the Government does not consider there to be merit in radical overhaul or abolition.
The Government considers business rates to be a crucial source of funding, providing a revenue of £25 billion per year in England. We are rapidly heading towards the next revaluation, which is due to take place in April 2023 following a two-year delay resulting from the pandemic. What are the key upcoming changes ratepayers should be aware of?
2023 revaluation key changes:
Shorter revaluations – More frequent, 3 yearly, revaluations will be required. This change will provide greater transparency as to how rateable values are determined and ensure business rates reflect the changes in the market and economic conditions. This is good news for ratepayers, creating greater transparency around valuations, greater valuation accuracy and a better appeals process. Many people are still calling for the 2 year Antecedent Valuation Date gap to be closed, but this was not addressed in the review.
Provision of information - Ratepayers will have a responsibility to self-declare in real time and annually all the changes to the property, including changes to the occupation or ownership and physical alterations. Ratepayers will have to utilise a new online system to provide the information required. The reason for this is to ensure the sustainability of a more frequent revaluation cycle.
Penalties and sanctions – Penalties and sanctions will be introduced for ratepayers if they do not comply with the new obligations to self-declare. We will see a ‘lighter approach’ taken for non-compliance in the early stages of implementation but by 2026 we are likely to see a much stricter approach taken.
Green Energy rate relief - From 1 April 2022, the Government introduced an exemption for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible low-carbon heat networks that have their own rates bill. This exemption will run until 1 April 2035.
Alteration to Material Change in Circumstance (MCC) appeals: There will be no scope to use a change in economic or market conditions as grounds for an MCC Appeal. MCC appeal grounds will continue to be reviewed throughout 2023 revaluation.
Transparency and Appeal Reform: There is an intention to remove the Check Stage by 2026, which will be made obsolete by the Provision of Information and the ‘Duty to Notify.’ Additionally, there is intended to be a 3 month challenge window at the 2026 revaluation. Ratepayers who comply with the Provision of Information requirements will be entitled to review more detailed data on how the VOA have compiled assessments during the 2026 revaluation as part of the transparency phase 2 commitment. Challenges will be prohibited if the ratepayer is non-compliant.
All of the above change support the long-term Government goal to digitise business rates, which the Government will look to consult on later this year. HMRC have a long-term goal to develop a versatile database for matching VOA business rates data with central HMRC tax data.
The direction of travel for business rates is clear: the onus will shift to the ratepayer to provide real-time information on changes to the property, which is then confirmed annually, giving rise to real time alterations to rateable value and avoiding back dated bills. Ratepayers need to prepare for the changes ahead of time by understanding requirements and recording and organising data to submit in line with new obligations. This will help inform accurate budgeting for alterations to assessments linked to this.
How we can help
Evelyn Partners has solid business rate expertise, utilising the skills of qualified business rates specialists with a strong track record. The move to annual compliance, shorter revaluations and part self-declaration means Evelyn Partners is well placed to advise clients through the everchanging business rates system. Due to the major changes intended from 1 April 2023 it is essential that ratepayers ensure that they are represented and are considering representation for 2023 revaluation now.
Disclaimer for content with tax addition
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.
The tax treatment depends on the individual circumstances of each client and may be subject to change in future.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2023/24.