LGA calls for business rates reform to minimise appeals risk

13 Jun 18

The business rates system must be reformed to protect councils against “unfair” appeals risk, council leaders have said today. 

Currently 133,000 business rates appeals from 2010 remain unresolved, according to analysis of government figures by the Local Government Association.

An LGA spokesperson told PF that even though two thirds of appeals were not successful, “councils must assume that they will be” meaning they must set aside cash in case a rebate is necessary.

Last month in PF, local government groups called for more certainty over business rates provisions, expressing concern that the up-coming changes to value properties every three years rather than five could result in more business rate appeals.

This would leave councils unsure of how much provision for appeals they would have to set aside, CIPFA and the LGA told PF.

The LGA today said that councils have been forced to divert £2.5bn away from stretched local services over the past five years to cover the risk of business rate appeals, as they have to fund half the cost of any backdated refunds.

John Fuller, vice chair of the LGA’s resources board, said the ongoing delays were “heaping further financial uncertainty and pressure on out local services”.

“Despite not setting business rates or ruling on appeals, councils are having to take billions of pounds away from already stretched local services, such as adult social care, protecting children and supporting businesses and boosting local growth, to cover the financial risk and uncertainty arising from the backlog of appeals. This is completely unfair.”

The LGA wants to see reform of the appeals system which includes:

  • Setting a time limit for appeals (In Scotland, there is a six month time limit for businesses to appeal their valuation, but no such limit exists in England and Wales).
  • Modernise the way business rates affect different ratepayers, to ensure that sectors such as online business make a fair contribution.
  •  Tackle issues of business rates avoidance, which the LGA estimates costs £230m each year.

 

More than one million businesses have challenged their business rates bill since 2010.

Rishi Sunak, the parliamentary secretary of state at the Ministry of Housing and Communities and Local Government, has told PF in an exclusive interview that the government still intends for councils to retain 100% of business rates “at some point” in the future and “when the appetite is there”.

Currently, councils retain 50% of business rates but some are on a 100% business rate retention pilot scheme.

Councils will be able to keep 75% of rates by 2020-21 as central government grants are phased out.

Sunak suggested the Fair Funding Review will ensure councils are adequately financed and explained to PF that the re-look into local authorities' individual needs and resources was a “rare opportunity” that needed to be “got right”. The full interview with Rishi Sunak will appear in next month’s PF magazine.

The consultation on the review, which will set new baseline funding allocations, ended in December last year. 

The Ministry for Housing, Communities and Local Government has been contacted for comment.

Read an Institute for Fiscal Studies blog for PF on the financial implications of 100% business rates retention.

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