The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill legislates to ensure that COVID-19 cannot be taken as a cause of material changes of circumstances for business rates and makes provision in connection with the disqualification of directors of companies that are dissolved without becoming insolvent. We welcome the provisions in in the Bill.
Key messages
- The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill legislates to ensure that COVID-19 cannot be taken as a cause of material changes of circumstances for business rates and makes provision in connection with the disqualification of directors of companies that are dissolved without becoming insolvent. We welcome the provisions in in the Bill.
- Not all businesses affected by COVID-19 are covered by the reliefs previously announced and may struggle to pay business rates amid the ongoing economic uncertainty. It is therefore pleasing the Government will provide councils with £1.5 billion to offer grant relief to businesses which have been hard hit and seen their circumstances change due to the effects of the pandemic.
- It will be important that this funding is kept under review to ensure it is enough to meet demand and that guidance is published as soon as possible so that councils can set up schemes and ensure the new funding reaches businesses. Any new burdens due to administrative or IT costs should also be covered by the Government.
- The second part of the Bill regarding the disqualification of directors is may make it harder to set up ‘phoenix companies’ (a business that has been purchased out a formal insolvency process such as administration or liquidation, often by the existing directors) in order to avoid business rates.
- Alongside council tax, business rates represent the largest source of income for councils. Retained business rates contribute around a quarter of local authority core spending power. Business rates avoidance can therefore have a significant impact on council income and this legislation has the potential to reduce this practice.
- We continue to work closely with Government and partner organisations as further action is needed to reduce business rates avoidance. Further to this Bill, we are recommending that the Government bring forward separate legislation in England similar to those in Wales and Scotland which tackle the issue of avoidance. Any new legislation relating to business rates avoidance should come into effect with the next revaluation, which will happen in 2023.
- We look forward to working with the Government and parliamentarians so the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill is passed as soon as possible, and councils can get the reliefs in place.
Amendment statements
Lord Hunt of Kings Heath gives notice of his intention to oppose the Question that Clause 1 stand part of the Bill
We support Clause 1, which ensures that COVID-19 cannot be taken as a cause of material changes of circumstances for business rates. Not all businesses have benefitted from previously announced reliefs and many are waiting for this legislation to be in place so that councils can consider them for the new relief. It is important that the Bill passes as soon as possible so councils can get the new reliefs for business in place.
We are pleased the Government will provide councils with £1.5 billion funding to offer grant relief to businesses which have been hard hit by the COVID-19 pandemic and seen their circumstances change due to the effects of the pandemic. Confirmation that this relief will be an alternative to any adjustments to rateable values as a result of the change in circumstances arising from the pandemic has also provided much-needed certainty to councils.
At the Lords Second Reading debate Lord Greenhalgh, confirmed that the Government will publish the final local authority guidance as soon as the Bill receives Royal Assent. The LGA has been calling for the guidance to be published as soon as possible so that local authorities can start to put the reliefs in place.
Lord Cormack to amend Clause 4 so Section 1 comes into force at the end of the period of six months beginning with the day on which this Act is passed
As noted above, we want the Bill to be on the statute book and in force as quickly as possible (section 4(4) of the Bill as currently drafted says that section 1 comes into effect on Royal Assent). This proposed amendment would delay this by six months.
The LGA understands that the Valuation Office Agency (VOA) has paused COVID MCC challenges on the basis that the Bill will come into force imminently and although some might proceed to the Tribunal on the basis of the 18-month rule (after 18 months ratepayers with unresolved challenges have the right to appeal to the Valuation Tribunal), it would be surprising to see them listed for hearing.
Baroness Blake of Leeds to insert a new Clause which would place an obligation on the Secretary of State to make a statement on the impact of this Act on local authority finances and advice given to local authorities
We support this clause as it reflects LGA’s calls for the relief funding to be kept under review and for the local authority guidance to be published as soon as possible.
Baroness Pinnock and Lord Fox to insert a new Clause which would require the Secretary of State to carry out an assessment of whether the changes in section 1 improve the wider system of business rates.
We support this amendment as it reflects our calls to improve the Business Rates system. In response to the conclusions of the Government’s Business Rates Review, we said:
- In our response to the Call for Evidence for the Business Rates Review, we stated that although property continues to provide a good basis for a local tax on business, we cannot look to business rates to form such a substantial part of local government funding in the future and alternative means of funding councils will be needed instead or as well as a reformed business rates system. We look forward to continuing these discussions and to responding to future consultations including that on an online sales tax.
- In our submission to Tranche Two of the Business Rates Review call for evidence in 2020 and the more recent consultation submission, we say that we believe that a time limit on appeals, and a requirement for ratepayers to provide more data so that valuations take less time, might make more frequent valuations a viable proposition. We welcome the fact that the Government has confirmed that it will go ahead with related measures.