Government delays overhaul of business rates

A government decision to put off an overhaul of business rates will expose some of the industries most acutely affected by the coronavirus pandemic to another year of elevated bills, according to a leading consultancy.

The resetting of the property-based tax paid by companies, due to take place next year in England, will instead be put back to 2022, said the Department of Housing, Communities and Local Government on Wednesday.

It added the decision would “remove uncertainty” for businesses grappling with the impact of Covid-19, which has forced the temporary closure of tens of thousands of businesses, notably in the retail, leisure and hospitality sectors.

But Jerry Schurder, head of business rates at consultancy Gerald Eve, said that, far from ending uncertainty, the government’s move would result in elevated bills for companies next year, when they are likely to be dealing with the consequences of a severe recession.

The levels of business rates are recalculated every five years by reviewing the rental values of companies’ premises, and setting a multiplier which then rises in line with inflation. This process is known as the business rates revaluation.

The government’s decision to postpone the next revaluation until 2022 means companies receiving a business rates holiday in 2020-21 to offset the impact of Covid-19 — including retailers, restaurants and hotels — will face a return to bills next April based on rental values that were measured in 2015.

Rents for retailers’ premises have fallen sharply since 2015, partly reflecting how companies’ sales have shifted online.

Many retailers who have renewed property leases in recent months have been able to secure big reductions in rent.

“The [postponement of the 2021 business revaluation] means that when bills return next April they will — absurdly — be based on property values in 2015,” said Mr Schurder. “This predates not only the coronavirus crisis but the Brexit vote too.”

He said the current business rates holiday, which is set to cost the government about £10bn, should be extended for vulnerable sectors, such as retail.

Mr Schurder added that it was “quite a claim” by the government to say that businesses were benefiting from reduced uncertainty when it was not clear what rental values would underpin the 2022 recalculation.

A Department of Housing, Communities and Local Government spokesman confirmed that business rates paid by companies from next April would be based on 2015 rental values.

He said the government was considering whether to use a new set of values for the April 2022 reset. Alternatively, it could apply the values measured in 2019 for the now postponed 2021 reset.

Alex Probyn, president of expert services at consultancy Altus, called for business rates to be recalculated using valuations from 2021 that reflect the impact of Covid-19 on rents.

“It is far more beneficial economically to tie new rateable values . . . to post-Covid-19 levels, where the impact of the economic circumstances are more clear and when businesses will have had longer to recover,” he said.

The Department of Housing, Communities and Local Government spokesman said the government still intended to proceed with a review of business rates proposed in the Conservative party’s 2019 election manifesto, which pledged to reduce the overall burden of the tax.

In normal times business rates raise over £30bn each year for the Treasury, with the bulk of the tax coming from businesses in England.

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