By Richard Johnstone | 11 April 2014
The government has launched a review of the business rates system that will look at possible reforms to the administration of the property tax, which is collected by councils.
Chancellor George Osborne announced in last year’s Autumn Statement that the system would be reviewed, with its responsiveness to economic circumstances among the factors to be examined ahead of the planned revaluation in 2017.
Treasury minister David Gauke and local government minister Brandon Lewis have now called for responses to a discussion paper examining possible changes to the improve the effectiveness of the tax, levied on non-domestic properties.
Currently, the Valuation Office Agency set rateable values for nearly 1.8 million properties at every revaluation, based on the annual rental value. Councils then set the tax demands on the basis of a government-set multiplier. Half of business rate growth has been devolved to local authorities in England since last April, in a bid to encourage developments that will contribute to the economy
The government document has called for views on a less individualised approach, such as a system of zones where all properties in a certain area are valued according to the same value per square metre.
It has also asked for responses to the use of new indices to uprate the tax between revaluation periods. This could mean that, between revaluations, bills are adjusted based on price changes in the rental property market, instead of the current uprating by inflation, which may better match bills to the state of the economy.
The report also called for views on whether revaluations should take place more frequently than the current five-year cycle – although the next planned revaluation has been delayed two years ¬¬– or whether a system of ‘rolling revaluations’ should be introduced.
Although the discussion paper does not set out reforms to the current system of setting rates, it does seek views on whether the reliefs regime should be changed. Some discounts are applied automatically to bills but some require ratepayers to claim them, and the paper asks whether there should be consistent rules.
Lewis said the government wanted to look at options for longer-term administrative reform of business rates after 2017 that are simpler and deliver fairness, stability and predictability to ratepayers. Gauke said any reforms would ensure business rates remain a stable and sustainable tax which funds essential local services.
Responses to the discussion paper are sought from businesses, local authorities and others who interact with the business rates system by June 6.
