Business rates 18th September 2015

The business rates appeals process is "facing meltdown" and risks starting the new revaluation period in 2017 with a massive overhang of unresolved cases, despite the VOA hitting a target, set in September 2013, to resolve 95% of the 168,000 cases outstanding at the time by June 2015.

The target, set by the Chancellor, was designed to clear the backlog and free up resources, but the government’s unexpected introduction of a 31 March 2015 deadline for backdated appeals flooded the VOA with a wave of further claims – figures released by the VOA show that 195,00 appeals were lodged in the three months leading up to the deadline.

The VOA has today announced it has cleared 94.3% of the 168,000 cases outstanding in September 2013, but the new claims mean there remain hundreds of thousands outstanding. As of 31 March, some 272,360 appeals were outstanding, with only 90,000 expected to be dealt with this year.

Gerald Eve said the combination of the high backlog and a slowing in the number of claims being processed has raised the "very real prospect of the next revaluation cycle beginning in April 2017 with a huge number of cases – some dating back as far as 2010 – still outstanding".

Jerry Schurder, head of business rates at Gerald Eve, said: “It’s clear the appeals system is in crisis and facing meltdown. The VOA has found itself in the impossible position of being asked by the Government to drastically reduce the number of outstanding cases, while at the same time facing a surge in new appeals and having to reallocate scarce resources to prepare for the impending revaluation.

“It is ratepayers who will ultimately suffer the most, facing lengthy delays not only in having current appeals resolved but also any appeals against the 2017 revaluation assessments. The worry is that the Government will use the current level of outstanding cases to introduce punitive measures in an effort to discourage appeals.

Gerald Eve adds that with the Government currently undertaking a review of the structure of business rates there are fears that it will present the number of appeals as proof that ratepayers can’t be trusted, using this as a justification for introducing measures making it more difficult and costly to appeal against rates assessments. Indeed, the Queen’s Speech included provision for a new Enterprise Bill, which is to include clauses ‘modernising the appeals system’.

Schurder continued: “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.”