The £2 million cap on business rates relief from 1st July does not mean that all is lost for large operators with big property portfolios.
Robert Hayton, UK President of Property Tax at the real estate adviser Altus Group, explains that the £2 million cap on business rates relief from 1st July does not mean that all is lost for the large operators with big property portfolios.
The Office for Budget Responsibility forecast that the Budget measures provide £6.1 billion of business rates relief from 1st April for 2021/22 with the full holiday for occupied retail, leisure and hospitality premises extended in England to the end of June 2021. The relief will then continue at a reduced and capped level over the remainder of the next financial year.
Whilst this is only half of the story, looking at the capped levels in isolation, it is easy to understand why Frasers branded the Budget measures as “worthless” from 1st July. The Government will, no doubt, say if all goes to plan with the roadmap out of restrictions, non-essential retail will have been open for around 11 weeks. Whilst those sectors most adversely affected will have been rate free for 15 months at a total cost of around £14 billion to the Exchequer.
The much-criticised business rates system holds the solution in unlocking further significant and substantial financial help through valuation adjustments. A total of 303,260 non-domestic premises, across all sectors of the economy in England, lodged a Check to their property tax valuation during the 2020 calendar year up 321% on the 71,990 in 2019.
The reasonable assumption for the influx is that the impacts of COVID, specifically the restrictive measures introduced to counter the pandemic, have hit commercial occupiers hard, significantly reducing the rental worth of their properties, triggering more assessment challenges than ever before.
Many of these actions cite the pandemic as a material change in circumstance and should, ultimately, allow substantial and prolonged adjustments in rateable value to drive down the business rates liability. The OBR, for example, say that they expect business rates revenue to be hit by an additional £3 billion during 2021/22 alone as result although, to me, that seems somewhat conservative.
The £2 million cap, which has been the primary focus for some, pales into insignificance compared with what is at stake for those operators with big property portfolios and the level of reductions in overall business rates bills that are likely to be achieved.
At the start of the pandemic, and as restrictive measures were imposed, through our ‘group action’ involving more than 40,000 properties, we took the proactive and pre-emptive step to include retail, leisure and hospitality premises. This was despite, at the time, they had no actual business rates liabilities. It was simply to protect their position against future liabilities moving forward.
All is not lost for those that haven’t taken this course of action, but time is increasingly of the essence. With the roadmap out of restrictions, and as the economy begins to open, it is imperative ‘appeals’ are lodged without delay.
The Budget measures can then supplement this separate course of action taken to lower business rates liabilities directly as a result of the pandemic. To deliver this quickly the Government must now ensure that the Valuation Office Agency, an executive agency of HM Customs & Revenue, who maintain the rating lists, are immediately empowered to correct assessments quickly and pragmatically.
Ensuring rateable values reflect the true current rental value of commercial properties is an essential foundation to support businesses in their post-pandemic recovery.