Business Rates Review: technical consultation

1. The Local Government Association (LGA) is here to support, promote and improve local government. We will fight local government's corner and support councils through challenging times by making the case for greater devolution, helping councils tackle their challenges and assisting them to deliver better value for money services.
2. This response has been agreed by Lead Members of the LGA Resources Board.

Measures to enable more frequent revaluation

Q1. Do you have any views on the proposed implementation of the information provision system? What issues should be considered in the design of the new system?

Q2. Can you see any difficulties in collecting this information or providing it to the VOA? Is there any further information that should be provided?

Q3. How can the VOA best help customers understand what is needed and how to provide it?

Q4. How do you want to be engaged with as this system is developed?

3. As we said in our response to the 2021 consultation on more frequent revaluations, we welcome the fact that the Government is consulting on introducing a package of measures alongside revaluations once every three years.

4. We support the measures outlined in the technical consultation including the duty to notify the Valuation Office Agency (VOA) of changes to the occupier and property characteristics that affect the assessment of the property for business rates and the mandatory provision of rent and lease information, as well as trade information used for valuation. We also support an annual return by the ratepayer.

5. We welcome the fact that the document says that the VOA will share occupier details with billing authorities to support correct and timely business rates bills. We look forward to further discussions on how this will occur. The sharing should be automatic and should not have to go through the VOA information sharing gateway to which not all councils are signed up.

6. We consider that alongside new measures for ratepayers to provide information to the Valuation Office Agency there should be measures for further information to be provided to billing authorities where this would enable councils to discharge their functions effectively, relating for example, to determining liability and eligibility for reliefs. These should be introduced at the same time as the VOA measures in order to make ratepayer compliance simpler.

7. In designing the new information system, we consider that it is right that as far as possible ratepayers should be able to fulfil this duty online and that the burden on ratepayers minimised. As the document acknowledges, some of the ratepayers may be in receipt of 100 per cent small business rate relief. There should be provision for manual returns for very small businesses bearing that in mind. 

8. The VOA should ensure that all its material is provided to ratepayers is in an accessible format.  

9. We look forward to continuing engagement with both the VOA and DLUHC on this system. 

Q5. Does the proposed framework strike the right balance between a system of proportionate and flexible sanctions, and one which helps ratepayers to meet their obligations?

10. We support the introduction of a compliance regime with sanctions and penalties for non-compliance for late or incomplete information, missed deadlines or the provision of inaccurate or false information as we consider that it should be in line with other tax compliance regimes.

Q6. What would you wish to see in an online service to best help ratepayers meet their obligations?

11. As stated above the online service should be as easy to use as possible. The VOA should build on its current Check Challenge and Appeal system but it should be made easier to register.  

Q7. Under what circumstances would 30 days not be enough time for ratepayers to meet their obligations?

12. We consider that 30 days should normally be enough for ratepayers to meet their obligation as this is the same time period for taxpayers to inform HMRC about VAT changes. 

Q8. What processes might ratepayers have to put in place to meet their obligations and what costs might this bring?

13. Ratepayers will be in a better position to answer question 8.

Q9. Do you have any suggestions for how this compliance framework could be improved? If so, please provide evidence or scenarios.

14. At this stage we do not have any other suggestions for improving the compliance regime but we would ask DLUHC to consider any suggestions which others may make in response to question 9.

 

Q10. Do you consider that the proposed reform to the rules on MCCs will ensure that changes in economic factors, market conditions or changes in the general level of rents are reflected at revaluations? If not why not?

15. The LGA supported the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 which provided that COVID-19 was not a valid reason for a material change of circumstances (MCC). We support the proposal that MCCs should arise predominantly from physical changes of circumstances and that legislation, licencing changes or guidance should not be in scope for material change of circumstances (MCC) claims. These matters should be reflected at revaluations.

16. Q11. What are your views on the proposed improvements to the CCA system. How else could we improve CCA in a system under which ratepayers are now providing information under the new duties?

17. In our response to the 2015 consultation on ‘Reforming business rates appeals: check, challenge, appeal’ we argued that a check should not be part of the formal process which should begin with the challenge stage. There is merit in a process whereby ratepayers can check and correct the information that is held on their property. With a ‘duty to notify’ this may lead to the check stage no longer being needed.

18. We agree with a three-month window for submitting challenges and note that this will apply from the start of the 2026 list. We also call for the deadline for submitting appeals to be kept under review. The proposals are that a statutory deadline of the end of the list should be in place for all compiled list challenges – this could mean a maximum of 2 years and 9 months before a challenge becomes an appeal. This contrasts with the situation in Scotland where there is a deadline of six months from the start of a list for an appeal to be submitted.  

Q12. Are there particular considerations that the respondents consider the government should have particular regard to when moving forward with phase 2 of transparency?

19. We agree that ratepayers should have access to the fuller analysis of rental evidence for a specific property, an explanation of how the evidence has been used to arrive at a valuation, and further guidance, and that accessing these should depend on ratepayers being up to date with their obligations to provide information. As always, the government should bear in mind the need for proportionality in dealing with very small businesses.  

Q13. Will the proposed rules for the improvement relief ensure the relief flows to occupiers who are investing in their business?

Q14. Do you consider that the 2 conditions will give effect to the stated policy intent? Do you have any concerns regarding the practical application of the conditions as set out?

Q15. Do you agree that the proposed method of reaching the chargeable amount will achieve the objective of preventing ratepayers who have undertaken qualifying works from seeing an increase in their bill for 12 months as a result of the qualifying works?

20. We note that the Government has announced that the new mandatory Improvement Relief will be implemented in 2023. This was announced in the Budget and Autumn Statement 2021 and has not been subject to prior consultation. 

21. The description in the consultation makes it clear that to qualify for relief the ratepayer will have to meet two conditions, one relating to the qualifying works and one relating to continuing occupation. The first will be the responsibility of the VOA and the second will be for the billing authority to undertake.

22. Although we understand the Government’s wish to ensure that the relief is targeted to help occupiers making improvements in their premises we consider that the rules could be confusing to ratepayers. For example a new hereditament may not qualify for the relief whereas the extension of an existing hereditament will. So if a ratepayer adds an annex to their existing premises this would qualify for the relief. But a new building nearby but not adjacent would count as a new hereditament so would not be eligible for the relief.

23. Applying the new relief will be a new burden for billing authorities including liaising with the VOA on the qualifying works certificate and carrying out the occupation check. The new burdens procedure should apply for this.

24. We note that the Government said in the 2021 Autumn Budget and Spending Review that local authorities would be fully compensated for the business rates measures including the new improvement relief. We look forward to detailed conversations with the Government on how this will be implemented, including any implications for Business Rates Retention. 

Q16. Do you agree that the proposed changes to the plant and machinery regulations would ensure that plant and machinery used in onsite renewable energy generation and storage used with electric vehicles charging points are exempt?

25. In common with the improvement relief, these measures were announced in the 2021 Autumn Budget and Spending Review and have not been consulted on before. Both are intended to apply from April 2023 so discussions about their implementation should commence now.

26. The renewable plant and machinery exemption is a change to the Plant and Machinery Regulations and therefore a valuation matter. It is not clear how the Government will fulfil its commitment to compensate authorities for this change to Plant and Machinery regulations. It will be necessary to keep a record of all plant which qualified for the new exemption so that compensation for the business rates foregone can be paid to councils. 

Q17. Do you agree that the tests we are proposing in the heat networks relief scheme will ensure the relief is correctly targeted?

27. The heat networks relief scheme is a new mandatory relief and will be subject to the three criteria set out in the consultation; sole or main occupation, providing more thermal energy than electricity and being generated from a low carbon source. These criteria are detailed and will need to be carefully designed so that applying them is as easy as possible for billing authorities. We therefore look forward to early discussions as to how the new relief will be implemented and how councils will be fully compensated for income foregone in line with the Government’s commitment as well as any new burdens arising from the administration of the relief.

Q18. What are your views on the proposed reform to the administration of the central list?

28. The proposed reforms to the Central List, which concern the ability to make changes to the List without requiring a Statutory Instrument and allowing hereditaments within the list to receive relief are similar to those contained in the 2017 Local Government Finance Bill which did not achieve Royal Assent. We supported those measures then and would repeat our support.

29. We note that the Government has not yet determined the outcome of the 2021 consultation on changes to the Central List which are due to come into effect in 2023. We look forward to the outcome of this consultation and repeat our suggestion that the Government should consider properties currently on the central list which might be split (for example Network Rail stations) and which could go on local lists.

Q19. Do you agree that decisions on the operation of local discretionary relief schemes should be localised to billing authorities in the way proposed. Do you consider any rules should still be imposed from central government and if so why?

30. We agree with proposals to simplify the administration of discretionary rates relief by amending section 47 of the 1988 Local Government Finance Act 1988. We agree with the repeal of the six month’s condition and the regulations controlling variation of determinations and issuing of notices.  

Q20. Are local authorities, ratepayers or other interested stakeholders aware of any other instances where existing constraints on section 47 relief are giving rise to administrative challenges or unintended practical outcomes?

31. We also consider that the rules on excepted hereditaments (paragraph 8A and 9 of section 47), which prevent authorities awarding reliefs to themselves or preceptors, should be repealed. These prevent authorities awarding relief to premises such as markets which they own. This was a particular issue in the 2020 Retail Leisure and Hospitality Relief. 

Q21. Would the proposed reforms to the multiplier improve the administration of the system and if not why not? Do you agree that the deadline for confirming the multiplier should no longer be tied to the approval of the local government finance report?

32. We note that the Government intends to legislate for the multiplier to increase by CPI, in line with current practice. We note that local government receives compensation for under-indexation to RPI; we look forward to the Government confirming that compensation to RPI will continue. 

33. We support changing the legislation that prevents the multiplier being confirmed until the final Local Government Finance Settlement is approved by Parliament as long as this means the multiplier is confirmed earlier in the calendar year than it is currently.  It is vital that local government receives early confirmation as this enables correct bills for the forthcoming year to be issued in a timely manner.

Mike Heiser

Senior Policy Adviser

Phone: 020 7664 3265

Mobile: 07876 578189

Email: [email protected]