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Unless you’ve been living under a rock, you will have seen some of the noise being kicked up over business rates these past weeks. Research pulled together by Blackstock’s inhouse researchers, alongside our client, Daniel Watney, highlighted many issues.
Background – reasonable professional judgement
One of the biggest concerns was a “reasonable professional judgement” (RPJ) clause in new regulations that would enable appeals against incorrect rates bills to be thrown out if their margin of error was within this so-called “reasonable” margin. Hilariously, this margin of “professional judgement” was undefined.
So we looked at what the potential hit would be to firms from RPJ and estimated conservatively it would be over £700m just for SMEs. For large firms, REITs and the like, it would be several billions. Blackstock’s research was featured in the Sunday Telegraph.
Skip forward a bit, and in the last month, we’ve secured two front page Daily Mail stories, including this one, on this as part of our collaborative efforts with various trade bodies. Debbie Warwick, the Iron Lady at the helm of Daniel Watney’s ratings team, was interviewed on Sky News (watch here) when this all peaked two weeks back.
Now, in today’s budget, the government has unveiled a bundle of things but not fully addressed the concerns around RPJ. It’s laughably done nothing to ensure more frequent revaluations – other than promising something may be announced before the next one (in 2022!).
See our full analysis further down the page. The FT’s afternoon coverage included a response from Debbie Warwick here.
On RPJ, the government issued a tonne of small print that arrived too late for many of tomorrow’s newspapers. It was a u-turn of sorts on the idea of a set margin of error, which is in some respects welcome. However, all the government has done is shift the issue to tribunals who do not want it shifted to them.
The key statement was published here and reads:
In light of the concerns raised, the Government has decided to amend the proposed approach…..on appeal the VTE will be required to decide whether they consider the extant valuation to be a reasonable valuation. This will now replace the original proposal of “outside the bounds of reasonable professional judgement…
In short, the RPJ rule has been devolved: the valuations tribunal (VTE) will now apparently decide whether a proposed valuation is “reasonable”. This replaces an intolerable solid margin of error with an intolerable ambiguity. Ratepayers still do not know what a “reasonable” valuation is or what tribunals may consider to be an appropriate margin of error for that. It could yet still be the difference between a small business being able to claim small business rates relief or a small business paying nothing in rates at all.
Daniel Watney ratings expert John Elcox says: “As usual, the consultation has been widely ignored, but RPJ had been toned down although not cast out entirely.”
Further analysis by Blackstock’s head of research Tyron Wilson
Most of the main problems haven’t been resolved
The government is trying to pull the wool over people’s eyes on business rates with attractive headline measures in the Budget, such as rates discounts for pubs. But the main problems with rates that have been raised over the last month haven’t been addressed: most importantly the reasonable professional judgement clause in the government’s planned reforms.
The clause means if a ratepayer has been given an incorrect valuation within a margin of error, it could be thrown out and they could be forced to pay the higher level for 5 years. It’s the equivalent of being forced to pay an incorrect income tax bill if it was deemed “close enough”. Thirteen trade bodies have united to say the government should withdraw this part of their proposals. The government has come up with a fudge and said it will leave it to local tribunals to decide the margin of error. It needs to be withdrawn full stop.
There still isn’t help for those who are due the biggest reductions but won’t see them for years
While there is some welcome support, such as the help for companies losing small business rates relief, the transitional system means those seeing the biggest reductions in their rates bills won’t see them for years. Any larger property seeing a rates decrease of more than 25 percent won’t see that complete cut at all by the time of the next revaluation in 2022. Many of these firms have been waiting seven years for a cut, having been paying rates based on a valuation at the peak of the market in 2008. These companies ought to see their rates cuts straight away, or at the very least see them in full sooner.
The government has pledged another consultation and more regular revaluations again
The government has been pledging more regular revaluations for years, and we have yet to see any action or proper funding to make it happen. We’ll believe it when we see it. The government cannot expect to be able to fob ratepayers off by repeating a promise it has repeatedly failed to deliver.