As part of a statement announcing the draft legislation for the new Finance Bill 2020-21, the government said: "Under current legislation, the next revaluation would take effect on 1 April 2022 based on pre-COVID-19 property values as of 1 April 2019. In May 2020, the Government announced a postponement to provide greater certainty for firms affected by the impacts of COVID-19." It has subsequently announced that the next revaluation of non-domestic property in England will instead take effect on 1 April 2023 and: “so that it better reflects the impact of COVID-19, it will be based on property values as of 1 April 2021."
John Webber, Head of Business Rates at Colliers International, said: “While we understand why the Government has taken this approach- given the impact of COVID-19 on values- we think there are 3 issues that need to be considered.
“A six-year list is in nobody’s interest and only intensifies the need for urgent business rates reform,” he added.
The values currently in the rating list should be reduced because of the effect of COVID-19 on the back of tens of thousands of MCC (Material Change of Circumstances) appeals – and the government should thus be addressing these cases as a matter of urgency. We foresee that with a revaluation date of 1 April 2021, we will still be seeing values significantly impacted by COVID-19 and we doubt that the Valuation Office Agency (VOA) will have sufficient evidence or expertise to arrive at correct figures. The lasting effects of COVID-19 will lead to a significant reduction in rental values at the 1 April 2021 valuation date.
The Government will potentially be faced with is either a significant reduction in the annual tax take of £26 billion or, if it wishes to maintain £26 billion of receipts, it will have to increase the multiplier from the current level of 50p significantly or introduce another calamitous transitional relief scheme.
According to Colliers International, this could give the government the opportunity to recognise that the amount taken in business rates is excessive and unsustainable – and to reduce the multiplier accordingly. The likelihood is however that given the state of public finances by 2023 it is unlikely they will be able to afford to do this. The alternative could be that a properly resourced VOA could carry out a revaluation in 12 months and still introduce a new list on 1 April 2022.
This would be better than such a delayed list. Under today’s proposals, rate bills will still be calculated according to the 2017 list and 2015 values - until 2023 - a six-year list. Such a long list is in nobody’s interest and only intensifies the need for urgent business rates reform.