I always get a feeling of déjà vu when I start to write something about business rates, and this occasion is no exception.

High Street

Business rates reform effect retailers

The latest business rates reform is a blow for retail

How many times have retailers been promised rates reform?

How often have we been given crumbs of consolation by Westminster, while they play Bake Off with the ingredients of economic prosperity that we provide?

Thanks to the last lot of governmental jiggery-pokery, we are finally approaching the new ratings list – two years overdue.

The only sign of reform are new rules proposed by the Department for Communities and Local Government to curb our appetite for valuations appeals.

The Government’s response to the devolution of rates payments to local councils is the prosaically-named Check, Challenge, Appeal system.

How often have we been given crumbs of consolation by Westminster, while they play Bake Off with the ingredients of economic prosperity that we provide?

This was due to having finally dealt with the 666,000 appeals against the 2010 ratings list.

The concern is to give them a higher degree of continuity and confidence in their rates income.

With local authorities responsible for 50% of appeals costs, it’s keen to avoid the bills it’s been left with over the past three years.

According to the Department for Communities and Local Government, this came to a frankly staggering sum of £17.5bn.

A new process

A new appeals process was announced by the Department for Communities and Local Government in July after a consultation at the end of last year.

It includes a number of stringent rules that seem to have gone largely unnoticed outside the hallowed circles of valuers and surveyors.

“The only sign of reform are new rules proposed by the Department for Communities and Local Government to curb our appetite for valuations appeals”

However, these are likely to have serious consequences for anyone paying business rates.

One of the worst is the requirement that appeals must not be “outside the bounds of reasonable professional judgement”.

Many experts expect this to mean valuation inaccuracies of less than 10%. Some think the margin may go as high as 20%.

As with many elements of our archaic rates system, it’s likely to be fairly arbitrary.

A property with a rateable value (RV) of £50,000 might have to accept an unfair charge of anything up to £25,000 over a five-year term.

This is assuming a roughly 50% multiplier.

“Reasonable professional judgement” also means that any business wishing to appeal a valuation will have to employ a surveyor.

Great news for surveyors. Not so great for small independents with small RV’s that might otherwise have handled the appeal themselves.

The cost of appeals

As a further disincentive to both surveyors and their clients, there’s now a £300 upfront fee for appeals, returnable if the appeal is allowed.

There is also a £500 fine for “recklessly providing false information”, which could simply mean getting your sums wrong.

These thresholds will impact claims for material changes in circumstances, like roadworks outside your store, as most usually fall below the 10% threshold.

“As with many elements of our archaic rates system, it’s likely to be fairly arbitrary”

With appeals voraciously discouraged and councils increasingly cash-strapped, it’s easy to see how valuations could be pitched at just on the right side of “reasonable”.

Rates up to 20% higher than they might otherwise have got away with.

Worried letting agents

The effect of any new regulations won’t be fully known until the new lists are published next year.

However, I’ve already had conversations with worried lettings agents and shopping centre managers fearing how they may effect short-term lets, particularly of small units.

There are also worries about solar panels being included in assessments in the same way as air conditioning systems.

Businesses seeking to reduce their carbon footprint and electricity bills will see those gains wiped out in a single stroke from the valuer’s pen.

I’ve given up seeing any real upcoming business rates reforms, but I at least hoped we’d not see things get any worse.

In principle the idea of devolving business rates should make local councils more responsive to businesses in their area.

But, as always, the devil is in the detail.

With these details about to become reality, it seems the devil is alive and well – and living in the Department for Communities and Local Government.

  • Ian Middleton is co-founder and managing director of jewellery retailer Argenteus