Property continues to provide a good basis for a local tax on business. Business rates is efficient to collect and has been relatively predictable and buoyant in recent years. However, the changing nature of business alongside the nature of demand pressures on councils means that 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 of or as well as a reformed business rates system, of which one example is a tax on online businesses.
The Local Government Association (LGA) is the national voice of local government. We are a politically-led, cross party membership organisation, representing councils from England and Wales.
Our role is to support, promote and improve local government, and raise national awareness of the work of councils. Our ultimate ambition is to support councils to deliver local solutions to national problems.
We responded to last year’s Call for Evidence on the Business Rates Review. In our response to Tranche One we said that local government has strong interest in a reformed business rates system which commands confidence. An income which keeps up with demand is also important given the pressures on local government especially at this point.
Property continues to provide a good basis for a local tax on business. Business rates is efficient to collect and has been relatively predictable and buoyant in recent years. However, the changing nature of business alongside the nature of demand pressures on councils means that 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 of or as well as a reformed business rates system, of which one example is a tax on online businesses. Our response to Tranche Two covered the questions on more frequent revaluations. We would respond to the questions in this consultation as follows.
1. Does the proposed package of measures represent a fair and balanced trade-off for ratepayers between new benefits and new requirements? If not, please detail what adjustments you would like to see, to ensure a balanced package of measures that would support a three-yearly cycle while taking account of deliverability constraints.
Improving the accuracy of the list
In its submission to Tranche Two of the Business Rates Review call for evidence in 2020, the LGA said 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 therefore welcome the fact that the Government is consulting on introducing a package of measures alongside revaluations once every three years.
The consultation makes reference to a new ‘duty to notify’ the Valuation Office Agency (VOA) of changes to occupier and property characteristics – for example splits, mergers, conversions or change of use. This would be made through an online portal. We support this.
We also support an annual return by the ratepayer and a compliance regime as outlined, including making the ability to submit a challenge conditional on having complied with the Duty to Notify and the mandatory provision of lease information. We support revising the regulations to deal with late or incomplete information and penalties for non-compliance, including missed deadlines or the provision of inaccurate or false information.
We consider that alongside new measures for ratepayers to provide information to the Valuation Office Agency (VOA) there should be measures for 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.
In Wales sections 151-153 of the Local Government and Elections (Wales) Act 2021 give billing authorities powers to seek information for the purposes of non-domestic rating (section 151), require ratepayers to supply to billing authorities information relevant to determining liability to non-domestic rates (section 152), and give billing authorities powers to inspect properties (section 153). We would like to see these provisions introduced in England at the same time as the requirement to provide information to the VOA for valuation purposes.
If new duties are to be placed on ratepayers, relating to their dealings either with the VOA or with councils, it makes sense for them to be introduced together, particularly as both are likely to require primary legislation. The document mentions a fair compliance regime and we consider that this should apply both to ratepayers’ dealings with the VOA and with billing authorities.
Streamlining the appeals system
As highlighted above we are supportive of a new ‘duty to notify’ the Valuation Office Agency (VOA) of changes to occupier and property characteristics. With a ‘duty to notify’ this may lead to the check stage no longer being needed so in theory we are supportive of the discontinuation of this stage as part of the formal process. However, there is merit in a process whereby ratepayers can check and correct the information that is held on their property.
We also called for a clear deadline for the submission of appeals, pointing to the situation in Scotland where the deadline is six months. The proposals in this consultation are for there to be a three month window after the list comes into force for completed challenges to be submitted. However, this relates to challenges not appeals. The consultation makes it clear that there would be a maximum 18 months allowed for challenges to be resolved before they automatically become appeals. Although this will allow for similar challenges to be grouped together by the VOA, it could still mean a maximum of 21 months from the commencement of the list for appeals to be submitted. We therefore welcome the streamlining of the process but call for it to be kept under review with a view to further streamlining if there are continuing delays.
We also repeat our suggestion made in our Tranche Two submission that billing authorities should be allowed to be parties to appeals as was the case before the introduction of Check, Challenge and Appeal. Local authorities frequently have an interest in strategically important ratepayers, particularly given the implications for business rates retention and they should be allowed access to the process in order to be able to submit evidence which will help the VOA or the tribunal to come to a view.
We agree that there should be a fee for submitting a challenge, refundable in the event that the challenge is found to be valid, in the same way as this applies to appeals.
We welcome a review of the circumstances in which Material Changes of Circumstances (MCC) apply. We have supported the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill which will amend the law with respect to MCC with reference to COVID-19 and would welcome further consideration of when Material Changes of Circumstances apply.
Providing greater transparency on valuations
The key steps are ensuring that ratepayers have more information and ensuring that there is more information for ratepayers which is accurate and understandable, such as the publication of new guidance on valuation methodologies and, at a later stage, analysis of rental evidence for each specific property. We also support the introduction of a fee for transparency requests, this should not be set at a level to discourage such requests but should enable costs to be covered.
Finally, we would urge that the VOA be properly funded to discharge its functions. There has been concern that in recent years some of the delays in resolving appeals have been due to understaffing at the VOA. One of the conditions of introducing the new regime, where more will be asked of ratepayers, should be that the VOA is resourced appropriately.
2. What steps could be taken to support ratepayers to comply with the new duties? For example, elements to reflect in the design of the reporting portal, or content that would be helpful to include in the supporting guidance.
We believe that ratepayers are best placed to answer this question but agree that the compliance regime should be proportionate and consider that this should apply to ratepayers’ dealings with billing authorities as much as it should apply to their dealings with the VOA.
We consider that it is important that this be designed to be as user friendly as possible, learning the lessons of the VOA’s experience with CCA where there were early problems with its introduction. Consideration should be given to improving the existing portal rather than inventing something new as the latter could lead to further teething problems and would create a system unfamiliar to everyone.
3. Are you supportive of the proposed approach to Transparency? Are there further elements you think should be made available as part of a Transparency offer?
Please see the reply to Question 1 above. We do not have any further elements to suggest at this stage.
4. What steps could the Government, stakeholders, or industry take to support a smooth move to a 3-yearly cycle?
It is important that the move to a three-year cycle should go as smoothly as possible. However, it should not be unnecessarily delayed. The consultation sets out the proposed stages but does not set out a timetable. We think it important that this be published. For example, if the 2023 list were to be a period of transition it should be possible to introduce the measures gradually so that check can be removed for the 2026 list to allow for the new duty to notify to embed in the system. However, this should not delay the passing of appropriate legislation including measures for greater information to be provided for billing authorities outlined above.
5. Do you have any other comments on the proposed approach to the move to a three-yearly cycle?
The proposal to move to a 3-yearly cycle for business rates is a positive step, but needs to be considered alongside further proposed local government finance reforms to enable authorities to effectively plan for the medium term. The long overdue fair funding review, social care green paper and other reviews need to be concluded; multi-year settlements need to be re-introduced and local government needs to be appropriately resourced for the future.
6. Do you agree that that moving to a three-year cycle should be the Government’s priority for this stage of reform, and that going further should remain an option for the future?
We agree that at this stage the aim should be to embed three year valuations, and the associated changes, successfully before considering moving to even more frequent valuations. Please see the comments in the answer to question 7 below.
7. Would you support a move to an annual revaluations cycle or a shorter AVD in the future, accompanied by the necessary enabling reforms set out in this chapter?
We note that an antecedent valuation date of one year is being introduced in Scotland in time for the 2023 list, so that valuations will relate to April 2022 as opposed to April 2021, which is the case in England and Wales. We consider that the Government and the VOA should look at how the Scottish experience goes and see if there are any lessons to be learned. However, we would be concerned about any discontinuation of the draft list. With the 2023 list the timetable for the draft list is going from six months to three months before the new (‘compiled’) list comes into force in April 2023; it remains to be seen the extent to which the draft list in 2022 will be published in time for councils to carry out the necessary functions with their software suppliers.