Wrapped in a £1.5 billion business rates relief fund announcement late last month was confirmation of the Government's intention to rule out Covid-related rates appeals, as commercial property expert Andrew Kilpatrick explains.
Any hopes that the Government were serious about addressing the flawed current business rates system were dealt a heavy blow when ministers announced their intention to legislate to prevent ratepayers claiming business rates relief due to the effects of the Covid-19 pandemic.
The legislation is to have a retrospective effect, so effectively killing off the 400,000 rates appeals currently believed underway on the grounds of a material change in circumstances.
The retail and restaurant sectors have benefited from Government relief in the form of 100 percent rates relief from 1 April 2020 to 30 June 2021, and partial relief for nine months thereafter.
But businesses occupying offices and industrial properties or other commercial buildings which have been affected by the lockdown have received no help at all on their rates, but are expected to carry on paying full rent and rates, even where offices and factories have been closed and people have been furloughed or working from home, leading to a significant drop in productivity and profitability.
The Government is obviously aware these MCC appeals are likely to succeed, but rather than allow the rating appeal system to provide an equitable result, they are moving the goalposts and changing the law to prevent successful appeals – a shocking abuse of the system.
Instead, they are providing a £1.5 billion pot to be distributed by local authorities on an as yet unknown basis according to perceived need.
This looks to be completely ad hoc, but Government spin says “funds will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values, ensuring the support is provided to businesses in England in the fastest and fairest way possible”. This begs the question: how does one decide what sector of the business community has been affected most when there is no data on this and instead each local authority is expected to exercise its discretionary relief powers to decide? How they will cope with the flood of requests, when they are already hard-pressed, no one has said?
Rates are based on property rental values. That is their raison d'être, which means that when rental values fall so rates paid to the Government should fall But this action rides roughshod over the fundamental principle on which rates are supposed to be based.
Whilst on a practical level the Valuation Office Agency are probably not in a position to cope with large appeal numbers as well as prepare for Rating Revaluation 2023, this should not be used as an excuse for what seems to be a cynical manipulation of the rates system to prevent rates refunds properly due.
This action does nothing to engender hope that the long-postponed review of the business rates system will produce a better, fairer, faster system so many are seeking.
Andrew Kilpatrick is a chartered surveyor, member of the Rating Surveyors Association and IRRV and joint author of the Businessman’s Guide to Rating with a track record of successful rating appeals across the country. www.kilpatrick-cpc.co.uk