Cross-party consensus on the need for reform gives Parliament an opportunity to achieve a more functional business rates system, designed to bolster wider economic objectives, says Altus Group.
The international rating adviser, with experience of property taxation systems across the globe, calls on Parliament to require sharing of evidence with ratepayers by the Valuation Office Agency and to use UK business rates to encourage investment in plant and machinery, including renewable energy infrastructure. It warns against using business rates as a blunt tool for levelling the playing field between online retail and the high street or supporting struggling small businesses at the expense of major employers.
On reform measures currently under discussion, Altus Group advises against:
• Introduction of self-assessment by businesses that would lack access to the rental information on comparable buildings that is typically needed to establish the market value of a property
• Over-reliance on relief for small businesses that tends to benefit those requiring small premises rather than those with low turnovers or poor profitability.
• A shorter revaluation cycle that, in effect, would reduce the appetite for scrutiny and appeal and remove some of the incentive for the VOA to get valuations right first time
Altus Group executive Vice President, Robert Hayton, says, “Ratepayers currently have to appeal to find out the basis of their valuation. Sharing of evidence between the Valuation Office Agency and ratepayers would bring fairness and efficiency to the system in one simple step.”
“Exempting new investment in plant and machinery from valuations could encourage product development and process efficiency, both of which will benefit the UK’s productivity and our economic growth. It could also encourage the adoption by businesses of renewable energy technology, such as solar panels, which are currently penalised under the rates system.”
“The extension of the last five-year valuation period to seven years, and following a severe recession, has produced an exceptional shift in rateable values, but there is nothing fundamentally wrong with a five year revaluation cycle, provided it is always five years. It allows a business to plan properly over the short term. It fits in nicely with a normal rent review period or lease length, it follows the ordinarily gradual evolution of values and allows for periodic redistribution of liability. It means overpayments recovered on appeal are meaningful, with the cost and effort of challenge balanced by a lasting result.”