The UK government’s decision to delay the business rates revaluation has faced criticism from property specialists who are calling for a complete overhaul of the property tax system. This postponement means that businesses will be dealing with outdated property valuations for a longer period of time, despite the fact that property values have decreased due to the impact of the pandemic. The revaluation, originally scheduled for next year, has now been pushed back to 2023.

Even with the current rates relief schemes in place, businesses will still be paying rates based on property valuations from a time when the retail industry was thriving and store rents and values were continuously rising. These valuations are from April 2015 and fail to account for the repercussions of the Brexit vote, the rise of online shopping, and the current crisis caused by the coronavirus.

However, there is a glimmer of hope as the new valuations will be based on the situation in April 2021 instead of April 2019 as initially planned. This means that the valuations are likely to be lower than they were six years prior.

Business rates pose a significant burden for stores and can even be the determining factor for some struggling to survive, as was the case for department store chain Beales earlier this year. While business rates relief is available, the complex rules can result in companies paying more than they should, which was the issue for Beales.

John Webber, Head of Business Rates at property specialist Colliers International, believes that the current property values should be reduced due to the impact of Covid-19. He also expresses doubt that the Valuation Office Agency (VOA) will have the necessary evidence or expertise to accurately determine figures for the revaluation in April 2021. He warns that the enduring effects of the pandemic will lead to a significant decrease in rental values.

This presents a dilemma for the government as they may potentially face a significant reduction in annual tax revenue of £26 billion. Alternatively, they may have to substantially increase the multiplier or introduce another transitional relief scheme to maintain the current level of receipts. Webber suggests that this situation offers an opportunity for the government to acknowledge that the amount collected in business rates is excessive and unsustainable, and to adjust the multiplier accordingly. However, considering the state of public finances by 2023, it is unlikely that they will be able to afford to do so.

Useful Links:
1. Government guidance on business rates revaluation
2. Colliers International website