What business needs in a tax system is certainty, accuracy and fairness – Opinion – Robert Hayton.
For those affected by business rates; whether as a business owner, investor, landlord, employee or consumer – this was generally considered to be a positive move. Shorter revaluation periods mean that the tax, which is linked to the rental value of property, is revalued more often and so tracks changes in rents more closely. Government had been heavily criticised in the previous (2010 Revaluation) period for extending from five to seven years at short notice, meaning that businesses paid rates based on rents that were many years out of date.
Of course there are always winners and losers. Those whose property values had risen were paying less than would otherwise have been the case. Those whose values had fallen were paying more. The announcement in spring 2018 was supposed ensure that such unfairness and uncertainty did not happen again. It wasn’t so much the fact that the period between revaluations was too long: a five year cycle makes some sense in terms of predictability and planning, and is aligned with typical lease lengths and rent review patterns. The big problem was that the extension wasn’t expected and businesses were unable to plan for it. What business needs in a tax system is certainty, accuracy and fairness.
The Non Domestic Rating (Lists) Bill, which was the vehicle for putting the 2018 Spring Statement’s announcement onto the Statute books, was due to complete its journey and gain Royal Assent this week. But the proroguing of Parliament has resulted in the Bill being swept away and it will need to restart its journey, something that will take many months and may not be high priority for the legislators. The Bill would need to pass into law before Parliament Summer recess next year, and there is a very real possibility that there won’t be enough time. With the law change the Bill describes, the anticipated April 2021 revaluation will revert to April 2022.
And, as with the extension to the 2010 List, there will be winners and losers in terms of that extra year of liability on current values. However, it appears that certainty, accuracy and fairness will not be achieved any time soon.
So, who wins? Well, if the value of your property has risen over the four year period from April 2015 to April 2019 (the valuation date for an April 2021 revaluation) you’re probably a winner.
And so, if your property value fell in the same period you’re probably going to be worse off. Retail, as a generality, will be the hardest hit property sector, but manufacturing may also suffer.
Shorter revaluation periods aren’t all good news. One downside, as the Valuation Office don’t always (in fact more often don’t than do) get the valuation right first time, is that ratepayers will find themselves involved in more regular appeals. The more appeals we see in the system, the longer they will take to be resolved and so, perversely, certainty and accuracy will further suffer.
In my opinion, the four year cycle intended for the current period struck a reasonable balance between certainty and accuracy. Three years is ok, and it’s where Government wants to go, but I think business will be surprised by the way liability will swing around from one period to the next tracking short-term rental shifts. A period any shorter would be incredibly difficult to budget for.