Will the new business rates reforms have unintended consequences?

As June finally brought in the summer weather, it also brought with it reforms that business rates payers have long been waiting for. First announced in the Autumn Budget way back in 2017, the Government has announced new legislation which means that businesses will now pay rates that better reflect current property values.

Under the old system, property revaluations only occurred every 5 years, meaning that companies could end up with a business rate bill that was considerably out of step with their property’s current rental value. But this has now changed – from now on property revaluations will increase to every 3 years, and the next revaluation will be brought forward a year from 2022 to 2021.

So, on the face of it, this is certainly good news for business – more frequent revaluations will lead to a more precise estimate of a premise’s rental value, which in turn leads to more accurate business rates. But unfortunately, this new legislation will also carry with it unintended consequences.

Even under the 5 year regime, the valuation office is already grappling with a backlog of appeals, with some appeals taking anything from 2 to 5 years to resolve. Moving to 3 year revaluations, the shortest period ever introduced, is only going to exacerbate this already strained system, with the Local Government Association warning that additional resources will be needed to support the new regime.

The move forward of the next revaluation to 2021 also has consequences because this valuation will now be based on this year’s 2019 rents.

So what do these consequences mean for businesses? Well, two things. Firstly, it is more important than ever before for businesses to ensure they are in a position to appeal early, getting all relevant information together on any changes to their building or locality, and seeking professional advice on how best to expedite their appeal.

Secondly, because the next revaluation in 2021 is based on this year’s rents, it is important to ensure that any rent increases this year are kept to a minimum. To this end, we have been working with clients advising them on strategies to mitigate rent increases in 2019 and therefore reduce their exposure to the 2021 revaluation.

The arrival of these latest reforms certainly shows that the issue of business rates is moving in the right direction, but businesses need to be smart in order to navigate the right course.

For further information about this article please contact Mark Short.

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