In the autumn of 2021, the government concluded its review of the business rates system, and in October's budget, announced a number of measures it believes will meaningfully improve the operation of the system. The main proposed change is the move from five-yearly to three-yearly revaluations. 

Responses to the government's earlier consultation on the operation of the business rates system highlighted that there was a strong desire for more frequent revaluations to better reflect changes in the underlying property market, and to respond to economic changes in a timelier fashion. 

The government has now published a further technical consultation paper which sets out detailed proposals for the implementation of more frequent revaluations, and other changes to the system. The first part of the consultation focuses on the move to three-yearly revaluations, and the proposed changes the government says are required to enable this. These changes can be divided into three parts:

1. new requirements for the provision of information by ratepayers and property owners;
2. compliance provisions in respect of these information requirements;
3. changes to the business rates appeal system. 

Provision of Information

The requirements for provision of information or ‘Duty to Notify’ will be worrying ones for most businesses. They involve a new legal duty being created for ratepayers to update the Valuation Office Agency (VOA) each time circumstances change (such as when their rent changes, they start or stop occupying a property, or they physically alter a property) in respect of any properties they occupy; and to confirm with VOA each April that they have made any relevant notifications in respect of all properties and their information remains up to date. Ratepayers will be required to provide:

• information about the property;
• information about the tenancy of the property;
• trade and accounts information (where relevant to the valuation);
• costs information (where relevant to the valuation). 

This duty will apply to the occupier, where the property is occupied, and to the owner if the property is unoccupied. In addition, ratepayers will be required to make an annual online declaration confirming that they have provided the information required of them and to confirm that the data held for their property remains correct.

Compliance

The consultation paper also details the compliance regime that will be introduced to ensure ratepayers comply with the new duty to notify. It proposes that where an obligation has been triggered (for example where there has been a change to the property) ratepayers will be required to provide details within a 30-day window. It is proposed this change will be introduced during the life of the 2023 rating list, which could be anytime between 2023 and 2026.

The consultation also proposes that, from 2026, a sanctions regime will be introduced to ensure compliance with these new duties. Ratepayers may be liable for a penalty for each instance where they fail to notify the VOA of relevant information. The penalty level, and the number of penalties, will be dependent on the type of information that is not provided, such as valuation information or property information.

The proposed penalty tariffs range between £300 and £900 (depending upon the size of the property concerned) for a first offence of failing to supply rental receipts or cost information, with daily penalties for continuing non-compliance, and a penalty of 2% of the rateable value change (subject to a minimum of £300) for failing to supply property or occupier information. Higher penalties are proposed for provision of false information.

In addition to these penalties, ratepayers will not be able to challenge the assessment of their property, or have access to the VOA’s evidence in arriving at the valuation for that assessment, if they have failed to comply with the requirements for provision of information.

Appeals System

The final section of the consultation paper, which relates to the move to more frequent revaluations, covers changes to appeal rights including restrictions on material change of circumstance (MCC) appeals, and the removal of the current “Check” stage from the ‘Check Challenge Appeal’ (CCA) process.

As far as MCCs are concerned, it is proposed factors arising from legislation, licencing changes or guidance will no longer provide grounds for MCC appeals. This change is expected to take effect from the start of the 2023 rating list and is undoubtedly a result of the hundreds of thousands of appeals lodged by ratepayers on the grounds that the impact of Covid-19 constituted an MCC. The proposed change to remove the Check stage from the CCA process from the start of the 2026 rating list, will be accompanied by the introduction of a three-month window for Challenges. All Challenges submitted within this three month window will have to be dealt with the VOA by the end of the 2026 rating list, rather than within an eighteen month window as exists now.

The Government argues that the imposition of a three-month window to lodge Challenges at the start of a new rating list is necessary to ensure the majority of appeals are resolved before the commencement of the subsequent rating list. As it stands, there are no proposals to change the requirements of a Challenge, including the evidence to be submitted in support of a reduced rateable value. Unless the length of this Challenge window is extended as a result of the consultation or the requirements for a Challenge are diluted this proposal will cause ratepayers and their advisors considerable problems in identifying and subsequently challenging any rateable values which are deemed to be excessive in such a short timeframe.

Our View

Although more frequent reviews are supported by most commentators, the benefits for ratepayers in moving to three yearly revaluations appear to be far outweighed by the significant increased administrative burden arising from the requirement to provide information together the restrictions on appealing rateable values, particularly for those ratepayers with a significant portfolio.

Whatever the outcome of the current consultation, to which responses are invited by 22 February 2022, fundamental changes to the way information is provided to the VOA for it to value commercial properties and thereafter how ratepayers can appeal those valuations are coming very soon.

For more information please contact Paul Nash in our Rating team on the details below.