Looking Again at Business Rates Reforms

On the 18^th March, the House of Lords blew a significant hole through the Chancellor’s plans for business rates, rejecting key elements of the latest bill for reform: the Non-Domestic Rating (Multipliers and Private Schools) Bill.

The bill proposed to remove rates relief for independent schools and reduce costs for High Street retailers through an additional liability for all ratepayers where rateable values exceed £0.5m.

As presented, the Government did not provide sufficient detail or clear analysis, and there was particular concern regarding the scope and impact of the significant liability increases large properties would incur. Lords were not convinced and have made their feelings clear. The Government must now consider its position and we should expect further negotiations as the bill’s content and passage comes under greater scrutiny.

This is a further signal of the general disconnect between the Government’s growth agenda and the application of the business rates system.

Taking the Freeports growth initiative, certain reliefs exist for new business and property; however, these do not apply to existing premises. Teesside, as an example, is one of 12 established Freeport areas needing support for investment and jobs; there is nothing in the bill to indicate different treatment, and we must assume that existing properties valued at 0.5m or greater are captured by the definition of “all”.

If implemented today, analysis of Teesside 2023 List values would show:

• Over 120 properties valued at 0.5m or greater
• Additional liabilities from these properties in this area could exceed £18m pa
• There are over 20 schools, hospitals and other community facilities incurring an additional liability of c £2.5m
• There is one warehouse occupied by Amazon employing over 1000 staff with a potential £0.5m pa increase.

A further example, the Government has identified film studios as a growth sector requiring support; delivered by way of targeted relief, this positive initiative is potentially diluted as the main employing studios have valuations in excess of £0.5m and could be caught under the current proposals.

At a time when the Government is looking to encourage growth and reflect ratepayers (and particularly retail’s) long-held call for reform, this bill is at odds with its ambition. Business needs an agenda that is not just playing field levelling but a fundamental shift in the magnitude of cost and ability to forecast this outdated tax. This is a nationwide issue and cuts across all properties irrespective of their industry or location.

The current bill does not respond to ratepayers’ issues. The liability levels remain too high, and business remains no clearer regarding how these may increase further in 12 months’ time. Both are increasingly critical.

Now, at a time when the Government needs to refocus on its business rates reform in order to accept or reject the Lords’ amendments, is the perfect moment to look again – fully – at this tax and how it can genuinely and fairly support businesses across the county.

Until then, ratepayers should continue to track the proposals and, where possible, prepare. Paramount is reviewing property forecasts to ensure risk is identified, identifying all opportunities to bring liabilities down to the correct level and engaging their industry representatives to reinforce their concerns.