Rising rates bills set to prompt more challenges

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Businesses are facing a double whammy with rates bills set to rise because of the slow pace of transitional relief on top of an increase in line with inflation.
Adrian Smith of AS Rating

Businesses are facing a double whammy with rates bills set to rise because of the slow pace of transitional relief on top of an increase in line with inflation.

The plight of business owners is aggravated by the continuing problems surrounding the “check, challenge, appeal” (CCA) system set up by the government after the 2017 rates revaluation process to enable people to contest inaccuracies.

Adrian Smith, founder of Hull-based AS Rating, said the higher bills are likely to prompt more people to use CCA, but the complications of a system widely branded as not fit for purpose are still a major deterrent.

He said:

There are still more than 150,000 appeals outstanding from the 2010 revaluation process. The numbers of checks, challenges and appeals from 2017 are still low but that is only because it is still so difficult for people to register their businesses and begin the process.

Even when they start it they have to allow up to 12 months to check their rateable value and a lot of them are just put off. If it’s only a small amount a lot of them won’t bother. But it all adds up and there is a view within our sector that the government has achieved what it set out to do in terms of reducing the number of appeals and collecting more money.

The new bills include an increase of 3% in line with the Consumer Price Index from September 2017. But while the move away from using the Retail Price Index measurement of 3.9% softens the impact, the effect of transitional relief is another blow.

Transitional relief allows increases and decreases to be phased in before the next rating list goes live on 1 April 2021. Businesses which were handed an increase under revaluation will therefore see their new bill climb to the next level. Businesses which had their rates reduced will receive lower bills this year, but they are still paying more than the true amount.

Adrian said:

It’s hard to argue against the assertion that transitional relief creates a situation where businesses which are due a rates reduction are subsidising those which have had their rates increased.

It’s not a popular system because it delays passing on the benefits to the businesses. Businesses in a difficult trading area do not get the full reduction and ratepayers in a good trading area do not have to pay the full increase.

Adrian quoted the example of two businesses in Hull which are in the same sector and operate in the same street. One has seen its rateable value increase from £7,000 to £23,000 and the other, which operates from premises twice the size, has had an increase from £15,000 to £23,000. The actual liability is about half the rateable value but can be adjusted by transitional relief.

Adrian said:

There are question marks over both assessments but whatever the reality of the situation, checking and challenging the figures are not easy because of the problems with the system.

One of our clients has had problems registering on the system because she recently got married and her name is no longer the same as on her passport. She now has to try to contact the Valuation Office Agency to explain things, but even doing something as simple as that is riddled with difficulties.

More businesses are contacting me and other professional rating surveyors because they have attempted to deal with matters themselves and they can’t do it. More issues will emerge as more businesses see the scale of the burden and the scale of the injustices. The system is even more complicated than when it was launched, and the bills for businesses are increasing.