Three yearly business rates revaluations will be law
Government cedes business’s calls for rates reform as an online sales tax is unlikely.
Business is still waking up to the news that legislation will be made to ensure commercial premises in England and Wales are revalued every three years from April 2021.
The news caught many by surprise as a Bill was put before parliament on 14 June, midway through a parliamentary inquiry into the business rates system and its future.
In our responses to government BNP Paribas Real Estate has championed three yearly revaluations, as we believe that rates liabilities will be more akin to prevailing market conditions, enabling businesses to plan for a certain liability in the medium term, something that would not be possible with annual revaluations.
Whilst the news is most welcome government has not ceded calls for the timing of the valuation date to be pushed back from two years to one year before a rating list comes into effect. The Valuation Office Agency has said this would be administratively very difficult to achieve as they use the two year window to compile rental evidence and carryout valuations. Government is however, understood to be ambivalent about reducing this timescale in the future.
The prospect of an online sales tax looks less likely as government has said that it does not want to deter high street shops from their online services, such as Click & Collect, which it understands are complementary activities. A digital sales tax is more likely as part of a wider reform to the tax system, although government has said that such a tax would not change the balance of taxation between different types of retailer.
The introduction of three yearly revaluations will deliver a Conservative Party manifesto pledge, but expect more change: should the Conservatives remain in power there are plans for businesses’ rates accounts to be ‘digitised’ alongside other HMRC taxes from 2024, although Labour, Liberal Democrats and Green Party want to replace business rates with a land value tax .
In Scotland the 2017 revaluation will expire on 31 March 2022 as planned, with legislation being drafted for three yearly revaluations thereafter.