Budget update 9th July 2015

The first Tory Budget since 1996 today recommitted to completing a wide-ranging review of business rates aimed at improving administration but experts were disappointed by an approach that was more "stick than carrot".

Alongside the Budget document, the government has today published online two progress updates on the action it is taking to improve the administration of business rates, including the appeals system, and on tackling business rates avoidance.

The Chancellor also confirmed that the wide-ranging review of business rates will be fiscally neutral and will be completed by the end of the year.

The government wrote it is grateful for all the responses it received as part of this review. In addition, the Department for Culture Media and Sport and the Department for Communities and Local Government have published a joint consultation paper on the case for a business rates relief for local newspapers.

On the administration of business rates:

• The update on the administration of business rates sets out progress the government has made in developing a more efficient appeals system, better sharing of information, and simpler billing and collection.

• The government has committed to making these practical improvements to the business rates system by 2017.

Responding to the Chancellor’s announcement regarding changes to the appeals process for business rates, Jerry Schurder, head of business rates at Gerald Eve, said: “With an enormous backlog of unresolved cases, it is clear to any independent observer that the business rates appeals system is facing meltdown, and the measures unveiled today by the Government represent an inappropriate attempt to address the logjam.

“The Government has decided to use the stick of punitive measures to discourage appeals from being made rather than the carrot approach of a simplified, more transparent system that would both reduce the administrative burden and create a system that is fairer to ratepayers.

“The introduction of such measures would not only penalise those that can least afford them – smaller firms who don’t have the wherewithal to effectively prepare such appeals – but would also represent a misdiagnosis and mistreatment of the problem. It is not the actions of the ratepayers that clog up the system, but the structure of the system itself that needs to be changed.

“If the Government is serious about addressing the issues, it needs to move towards a business rates system that is more flexible, more reflective of prevailing economic conditions and removes the smallest properties from their liabilities entirely. The smallest two thirds of properties – some 1.1 million assessments – contribute just over 6% of the total rates take and should be removed from the system altogether. In addition, the VOA also needs to be more transparent, justifying its rates valuations to businesses so that they do not need to appeal in order to force the assessing body to reveal the data it used.

“Combined with far more frequent revaluations, which would greatly reduce the incentive to make appeals, such an approach would massively reduce the VOA’s workload while having a nominal impact on revenues. The Government should be looking to use the carrot of genuine reform rather than the stick of punitive measures if it wishes to create a business rates system that works for all stakeholders.”

On business rates avoidance the update on business rates avoidance provides a summary of stakeholder responses and further details on the scale of business rates avoidance.

It confirms that the development of anti-avoidance measures will be announced in due course.

Jerry Schurder, head of business rates at Gerald Eve, said: “The majority of the issues surrounding avoidance of business rates relate to the mitigation of empty property rates by landlords. In truth, such mitigation demonstrate not a problem with avoidance but instead a problem with a levy that is little more than a tax on failure.”

Mark Rigby, Chief Executive at CVS, said: “This Budget offers no clear signal that the confusion around business rates reform is going to be resolved any time soon. While a clear ‘business tax roadmap’ published by April 2016 is welcome, the Chancellor had nothing new to offer those affected by a broken business rates system.

“Confusion surrounds business rates reform – on one hand, the Queen’s Speech committed to reform the appeals process through the Enterprise Bill due to be published in October, while on the other the wider business rates review will conclude by the end of this year. UK businesses want to see clear action and the first step is a clear structural timetable. CVS calls on the Government to address the real obstacles in the rates system by bringing certainty to revaluations, efficiency to the appeals process, and crucial transparency to business rates assessments.”