Elevated bills in the wake of the pandemic
The government decision to postpone the overhaul of business rates will expose some of the industries most acutely affected by the coronavirus pandemic to yet another year of elevated bills.
The revaluation of business rates, due to take place next year in England, will instead be put back to 2022, as decided by the Department of Housing, Communities and Local Government, who claim the decision would “remove uncertainty” for businesses grappling with the impact of Covid-19, which has forced the temporary closure of tens of thousands of businesses, notably in the retail, leisure and hospitality sectors.
However, far from ending uncertainty, the move is more likely to result in elevated bills for companies next year, when they are likely to be dealing with the consequences of a severe recession.
The levels of business rates are recalculated every five years by reviewing the rental values of companies’ premises, and setting a multiplier which then rises in line with inflation. This process is known as the business rates revaluation.
The government’s decision to postpone the next revaluation until 2022 means companies receiving a business rates holiday in 2020-21 to offset the impact of Covid-19 — including retailers, restaurants and hotels — will face a return to bills next April based on rental values that were measured in 2015.
Rents for retailers’ premises have fallen sharply since 2015, partly reflecting how companies’ sales have shifted online. Many retailers who have renewed property leases in recent months have been able to secure big reductions in rent.
The postponement of the revaluation means that when the bills are issued next April they will be based on property values in 2015. This predates not only impact of coronavirus but the Brexit vote as well. This contradicts the government claim that ‘uncertainty’ will be removed.
The current business rates holiday, which is set to cost the government about £10bn, should be extended for vulnerable sectors.
A spokesperson for the Department of Housing, Communities and Local Government, confirming that business rates paid by companies from next April would be based on 2015 rental values, also said the government was considering whether to use a new set of values for the April 2022 reset.
The government could apply the values measured in 2019 for the now postponed 2021 reset. In the interests of fairness, business rates for 2022 should be recalculated using valuations from 2021, which will reflect the impact of coronavirus 19 on commercial premises and business as a whole.
In normal times business rates raise over £30bn each year for the Treasury, with the bulk of the tax coming from businesses in England.