LGA: self-assessed business rates will put council finances on firmer footing

6 Nov 15

Businesses should be able to self assess the value of their properties as part of further reforms to the business rate system, according to the Local Government Association.

This would provide councils with greater financial certainty once the tax is devolved.

A move to self-assessment is needed to protect councils from the cost of appeals against business rate valuations following full retention of growth from 2020, an LGA report said.

Under current rules, councils will have to meet the cost of successful appeals refunds once localisation of business rates is complete.

The LGA warned this would undermine financial planning in local government, with town halls responsible for appeals against values set by the independent Valuation Office Agency based on estimated annual rent.

Almost 900,000 businesses have challenged their business rates bill since 2010 and around 330,000 appeals still need to be decided before the next national revaluation takes place in 2017. Councils currently meet half the costs of refunds and have been forced to divert £1.75bn to cover this risk since 2010.

Self-assessment would make the system similar to other self-assessment taxes such as VAT and corporation tax, the LGA said.

Under the LGA’s plan, businesses would submit their own assessment of rateable value ahead of 2017. Businesses would only then be given a three-month window to appeal the final VOA valuation, compared to the current system when there is no time limit between revaluation periods.

Following this, a multiplier would be set based on the property values that would maintain the same levels of revenue, similar to the current system.

Claire Kober, chair of the LGA’s resources board, said the level of appeals against valuations proved that no one was happy with the way business rates are being calculated.

“By 2020, local government will retain all of its business rates income which will be provide a vital boost to high streets and investment in infrastructure and public services.

“However, it will also mean councils will be liable for 100% refunds. This makes reform of the appeals system even more urgent to protect councils from the growing and costly risk of appeals and ensure businesses are happy with what they pay,” she said.

“Councils will face £10bn in cost pressures by the end of the decade, even before the possibility of any further funding reductions in the Spending Review. 

“Every penny will count to give councils the best chance of protecting services over the next few years. Our self-assessment business rates proposals would free them to use the money put aside to cover the risk of appeals to fund vital services and help plug growing funding gaps.”

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