Plans to reform the business rates system were unveiled at the 2015 Conservative Party Conference by George Osborne, who said that the move would devolve power for more than £26bn of revenue to local authorities, reports The Telegraph.
In return, councils will be able to choose the level business rates are set at, allowing them to offer more attractive rates than their rivals. One of the biggest issues for companies at the moment is the infrequency of rates reviews, with many retailers complaining that rates exceed their rental payments as property values have changed since the last review in 2010.
In a report which analysed the feasibility of the new scheme, which will be brought in in 2020, the committee urged the Government not to scrap the Revenue Support Grant, which funds council activities, as part of the reforms.
Without the grant, it would be difficult to incentivise councils to lower their business rates and boost growth, the committee said, because they would be more reliant on the income.
Instead, the committee suggested that councils should be allowed to vary business rates according to the type of business which is paying them.
The committee’s report also pointed to evidence that there is a “massive problem” with business rate appeals which has been “repeatedly ignored” by the Government, and said the impact of appeals by ratepayers threatens to dwarf the actual income from the scheme.
Local authorities were found to be setting aside substantial sums of money, often for long periods of time, in case an appeal is successful. The committee suggested dealing with appeals outside the business rates retention system and funding them separately.
According to the Local Government Association, almost 900,000 businesses have challenged their business rates bill since 2010.
The Department for Communities and Local Government plans to consult on the business rates system this summer.
Clive Betts, who is chair of the committee, said: “The Government must address the alarm of councils, which are understandably worried that their spending needs and the funding of their local services will not be supported by their business rates revenue.
“Similarly, the issue of appeals is of significant concern to local authorities and it is essential that it is resolved before the Government pushes ahead with business rates changes.”
Edward Cooke, acting chief executive of the British Council of Shopping Centres, said he was pleased that the committee acknowledged the need to invest in improving transparency in the valuation system and reducing the number of speculative challenges.
He also said the Valuation Office Agency should be more transparent with the information it uses to determine the tax that businesses are being asked to pay.
“The current plans as set out in the government’s ‘check, challenge and appeal’ consultation do nothing more than shift the balance of responsibility for providing detailed information onto the ratepayer,” he added.
Jerry Schurder, head of business rates at consultancy Gerald Eve, slammed the “lack of detailed thought and planning” that he said had gone into the Government’s proposals.
“Since the policy was first announced, local authorities have voiced their concerns at the worrying absence of detail, specifically measures that need to be introduced to ensure some level of redistribution of revenues and to cover the risk of appeals reducing rates receipts,” he said.
He added that if these changes are not put in place, it would become impossible for local authorities to budget for expenditure.
“The lack of further information increasingly makes it look like a deliberate ploy on the part of the Chancellor to offload an issue that had become a thorn in his side and a political embarrassment,” he added.
