Non-Domestic Rating Bill, Committee Stage, House of Commons, latest Amendments, May 2023

• We welcome that the Government is legislating for a package of measures alongside revaluations once every three years. We support measures to improve valuation accuracy and timeliness including new duties for ratepayers to notify the Valuation Office Agency (VOA) of information on the calculation of their rateable value.
• We welcome the clarification that the new online system for receiving information from ratepayers will enable the VOA to share information with billing authorities and that the VOA will test this functionality and share information with billing authorities as part of the soft launch of the new system.
• We supported the reforms to material changes of circumstances due to the COVID-19 pandemic and support the changes in the Bill which will mean that material changes of circumstances should relate to physical changes only.
• We look forward to early discussions on implementation of the new reliefs including how councils will be fully compensated for income foregone, as well as for any new burdens arising from the administration of these reliefs.
• We welcome the Government’s promise to consult on business rates avoidance and evasion. This could include:
  • a review of exemptions such as where business happen to be located on farms.
  • further clampdowns on business rates avoidance along the lines of those introduced in Wales and Scotland to ensure that the rules on reliefs such as empty property and charitable relief are applied fairly.
• We continue to support more fundamental changes to business rates. This could include:
  • giving councils more flexibility on business rates reliefs such as charitable and empty property relief.
  • giving councils the ability to set its own business rates multiplier, or at the very least be able to set a multiplier above and below the nationally set multiplier.
  • consideration of alternative forms of income for local government including an e-commerce levy with the funding retained by local government.
  • bringing forward changes in the basis of liability so that more is defined in statute; how this is framed should be the subject of a further consultation involving the LGA and councils. This is because many fundamental concepts such as beneficial occupation have been set by case law leading to results which may seem puzzling to the public, such as the fact that large vacant sites may not pay business rates. 

Peter Aldous MP’s (Conservative, Waveney) Amendment 4 abolishes liability to non-domestic rates of advertising when a right is granted permitting the use of land for advertising (section 64) or when land is used for advertising or the erection of an advertising structure (section 65).

LGA view

• In the absence of any compensation, this Amendment would reduce the total income to local government. Advertising is an activity for gain. The LGA believes that advertising hereditaments should pay business rates.
  
   

Peter Aldous MP’s Amendment 5 extends the delay in uplifts to business rate bills from one year to five years.

LGA view

• This would extend the proposed improvement relief from one year to five years. As the Government has said that it will provide compensation to councils for the one year relief, it would therefore be necessary for this to be extended to five years if this Amendment were to pass.  

Peter Aldous MP’s Amendments 6 and 7 moves revaluations on local non-domestic rating lists at no more than three-yearly intervals and eventually towards annual revaluations on local non-domestic rating lists from April 2026 onwards. Amendments 8 and 9 apply the same effect for central non-domestic rating lists.

LGA view

• Amendments 6 and 7 taken together would keep the next revaluation as 2026 (three years) – but would then move to one year revaluations. The LGA supports three year revaluations on the basis of the ratepayer providing more data. The LGA does not support one year revaluations. We consider that at this stage the aim should be to embed three year revaluations, and the associated changes, successfully before considering moving to more frequent revaluations. The same goes for Amendments 8 and 9.

Peter Aldous MP’s Amendment 10 is intended as a move towards each single year being the relevant period for transitional provision under the Local Government Finance Act 1988.

LGA view

• This Amendment would provide that transitional relief would apply for one year only rather than three. The LGA supports three year revaluations on the basis of the ratepayer providing more data. The LGA does not support one year revaluations for the reasons stated above.
  
   

Peter Aldous MP’s Amendment 11 intends to abolish downwards transition and Amendment 12 intends to remove downward transitional phasing.

LGA view

• The aim of downwards transition is to pay for upwards transition, in effect putting into law the position for the 2023 revaluation, where the Government has removed downward caps. In this Bill, the Government is abolishing the requirement that the transition scheme should balance but it is not abolishing downward caps permanently. These Amendments, taken together would mean that a transitional scheme could never contain downward caps, meaning that it would always have to be financed by the Government if there were not to be a loss of business rates income. The LGA’s view is that councils should be fully compensated for the impact of revaluations and any transitional relief schemes and that any administrative costs should be fully covered under the new burdens doctrine.

Peter Aldous MP’s Amendment 13 is a paving Amendment for his Amendment 14, which intends to exclude businesses who have nothing to pay from the duty to notify HMRC and the VOA. Also in line with Amendment 14 is Helen Morgan MP’s (Liberal Democrat, North Shropshire) Amendment 20, which would exempt businesses in receipt of Small Business Rate Relief Exemption from annual reporting if there is no change to report.

LGA view

• The LGA supports the duty to inform applying to all businesses including those which pay nothing, for example, because they receive 100 per cent small business rates relief. Even though the particular hereditament may pay nothing, the VOA still has an obligation to include it on the rating list. The VOA therefore would have more work in the absence of the ratepayer duty applying to these properties. In addition, any changes to the hereditament could mean that it has to pay business rates. The LGA therefore do not support these Amendments.

Peter Aldous MP’s Amendment 15 imposes reciprocal penalties on the VOA for failure to notify ratepayers on changes in their rate assessments.

LGA view

• The VOA is a government agency which is publicly funded, the effect of these reciprocal penalties would be to require more public funding for the VOA to deliver the same level of service. The LGA has called for the VOA to be properly funded in order that backlogs in dealing with rating challenges do not occur.  

Peter Aldous MP’s Amendments 16 and 17 remove Clause 14 and replace it with a paragraph which would provide that the rateable value of hereditaments which consist wholly or in part of land on which an advertising right is exercisable to be calculated as though the advertising right does not exist.

LGA view

• Clause 14 provides that material changes of circumstances relating to valuation should relate to physical changes only. This Amendment would remove it and replace it with a paragraph having the same effect as Amendment 4. The LGA believes that advertising is an activity for gain and so should pay rates. The LGA therefore does not support the removal of Clause 14 from the Bill.

Helen Morgan MP’s New Clause 1 would require annual reports from the VOA on its performance against targets to be set by the Secretary of State.

LGA view

• As stated above, the LGA would support additional transparency.

New Clauses relating to reviews of the differential impact of business rates on retail and hospitality

Helen Morgan MP’s New Clause 2 would require a review of the differential impact of business rates on different parts of the retail sector and Daisy Cooper MP’s (Liberal Democrat, St Albans) New Clause 3 would require a review of the differential impact of business rates on different parts of the hospitality sector.

LGA view

• The Government carried out a Business Rates Review from 2020 to 2022; it is not clear why there should be a particular review for these sectors. The LGA supports more fundamental changes to business rates. This could include:
  • giving councils more flexibility on business rates reliefs such as charitable and empty property relief
  • giving councils the ability to set its own business rates multiplier, or at the very least be able to set a multiplier above and below the nationally set multiplier
  • consideration of alternative forms of income for local government including an e-commerce levy with the funding retained by local government
  • bringing forward changes in the basis of liability so that more is defined in statute; how this is framed should be the subject of a further consultation involving the LGA and councils. This is because many fundamental concepts such as beneficial occupation have been set by case law leading to results which may seem puzzling to the public, such as the fact that large vacant sites may not pay business.

Arian Nemati, Public Affairs and Campaigns Adviser

Email: [email protected]