An “unprecedented” number of companies are attempting to reduce their business rates bills as the impact of the coronavirus pandemic on high streets and offices looks set to last far longer than first anticipated.
According to Colliers International, the property consultancy, some 170,000 businesses have taken the first step towards appealing against their rates since the pandemic began in the UK in March. That is more than the total number in the three previous years, during which 159,000 queried their rates.
“The numbers are unprecedented,” said John Webber, head of business rates at Colliers. Coronavirus is the “biggest material change in circumstances in the history of ratings”, he added.
Appeals are lodged with the Valuation Office Agency, part of HM Revenue & Customs. Businesses raise queries about their rates through a three-stage process called “Check Challenge Appeal”.
Typically the VOA will assess these individually, but given the wave of “checks” that have been submitted, Mr Webber anticipated that more sweeping changes may be implemented.
“They might be tempted to look at it across whole regions: every shop, hotel and office in some locations have been affected. The numbers [the VOA] have got mean they’ve got no choice other than to deal with them in a much more broad-brush way,” he said.
A separate review of the rates system is under way, and business groups have called for rates to be frozen for the next two years and then reduced, to reflect the pandemic’s impact.
Business rates are a considerable cost for any company occupying commercial premises, and provide an important income stream for councils, which use the revenue to fund local services. In the last tax year, local authorities collected £25.6bn in business rates.
The payments are based on a building’s rateable value — effectively an estimate of a property’s rental value at a given date. Current rateable values are set according to rents on April 1, 2015.
Office occupiers, retailers and hoteliers complain that coronavirus has destroyed the previous basis for assessing rateable values. Non-essential retailers have faced extended closures and heavy reductions in footfall; hotels have seen guest numbers plummet; and offices have been largely empty for the last seven months.
Those businesses argue that the pandemic has meant a material change in circumstances, an argument the VOA will now weigh up.
The VOA said: “The coronavirus pandemic has led to an unprecedented increase in ratepayers seeking reductions in their rateable values.” The agency added that it had cleared a number of cases at the “check” stage and was now seeing a “higher than usual numbers of challenges”.
Some companies, such as small businesses in retail, hospitality and leisure, have been granted temporary relief from rates bills until April, by which point it had been hoped that normal operations would have resumed.
But many have missed out on rates relief or grants — which have only been offered to businesses in certain sectors or with premises below a certain rateable value — and a full recovery by next spring looks unlikely.
“We’re still expected to pay the full rate, which for us is £100,000. It’s ridiculous when you consider our business is down 94 per cent since March and doesn’t look like it will come back immediately,” said Jane Dancaster, who runs an English language school in Wimbledon.
“The overhang of Covid-19 will be a lot longer than people think. People thought it would be over by Christmas and that by next April they would be paying rates,” said Mr Webber.