CIPFA and the Local Government Association have expressed concern that the move to value properties every three years rather than five could result in more business rate appeals.
They spoke to PF after a letter emerged in April suggesting the government had u-turned on a promise to compensate councils for loss of income due to the reversal of the so-called ‘staircase tax’.
This is where businesses occupying more than one floor with stairs between were taxed for the separate levels as if they were different buildings.
Reversing this will mean councils are collecting less in business rates.
Chancellor Philip Hammond promised to reduce the valuations cycle in last year’s autumn Budget and in March brought the next valuation ahead a year to 2021.
Jo Pitt, CIPFA’s local government policy advisor, said appeals can cost councils “considerable amounts” and “takes money out of the system for public services”.
She said it was also possible the number of appeals could go down, since a ‘check and challenge’ system was introduced in April 2017, whereby companies have to provide evidence for an appeal.
But she said the big issue for councils was uncertainty. “If you don’t know exact figures it’s harder to budget,” Pitt said.
The Local Government Association said the number of appeals was likely to go up, as they could be made more often.
“More than a million businesses have challenged their bill since 2010 and hundreds of thousands of appeals are yet to be decided,” the association told PF.
When councils can collect 75% of business rate income by 2021, they will have to bear more of the cost of refunds, the LGA noted.
“A transparent and fair system of valuation and appeals is vital to provide greater certainty of cost,” the LGA said. It suggested imposing a deadline on businesses putting in an appeal.
David Phillips, associate director at the Institute for Fiscal Studies, believed the number of appeals could drop because there are likely to be smaller changes in valuations over three-year rather than five-year cycles.
He suggested: “A centralised provision for appeals would be fairer because the councils are currently paying for appeals on valuations that are not under their control”.
There were 1,210 valuation appeals between 1 April and 31 December last year, according to government figures – a 99.3% drop in challenges in the same period after the last system change to limit appeals took effect in 2010.
A Ministry of Housing and Local Government spokesperson told PF: “The new [check and challenge] appeals system is designed to make the process of challenging business rates more structured, transparent and efficient which will help to manage the impact of more frequent revaluations.”
They added: “It is right that people have the ability to challenge their valuations. The ministry is working closely with local government to consider how the effects of these are best managed across the sector as we move towards 75% rate retention.”
