Government failure to Reform the System Denies Cash Lifeblood for troubled sector.
Struggling retailers, already suffering from the imbalance of the current business rates regime are facing a double hardship as the appeal system spirals out of control, impairing their ability to receive much needed refunds, says John Webber, Head of Business Rates at leading international property consultants Colliers International.
According to Webber, retailers who pay an unproportionate slice of the UK’s £26 billion business rates bill (this year retail is expected to pay in the range of around £7.625 billion) rely on their refunds from successful appeals when planning their business forecasts. Through the experience of his own clients, Webber estimates that on average retailers receive approximately 5% of their annual rates bill back as a cash refund. Failure to receive this therefore means retailers are losing out on over £38 million a year of a much-needed cash injection and given that the list began in April 2017, Webber estimates this means they could be out of pocket for around £115 million.
Much has been made of the difficulties for companies trying to get their appeals through CCA, the Government’s Check, Challenge, Appeal, business rates appeal system introduced in 2017, which has been branded by many in the rating profession as cumbersome and complicated. The system is so difficult to navigate that retailers have either delayed putting in their appeals, in the hope that the system gets sorted, or find themselves stuck in the Check and Challenges stage of the process, before even getting to appeal.
“The impact of the snarl up in the Government’s business rates appeals system is taking its toll,” says Webber. “And latest figures don’t give any promise that the situation is getting any better.”
Latest statistics from the Valuation Tribunal (VT) just released reveal...
... that the number of outstanding appeals against the 2017 list has increased by 360% in the quarter (April 2019 to June 2019). These are appeals that have managed to get through the Check and Challenge aspect of the new appeal system and are actually at appeal stage.
The Tribunal received 102 appeals against the 2017 list in the quarter (and had 34 brought forward) but only managed to clear 13 - leaving the number outstanding at the end of June 2019 to 123.
When this is put into context that the VT has said publicly that it expects to see an avalanche of appeals when retailers finally do get round to navigating through the system, with some commentators anticipating up to 40,000 appeals against the 2017 list, and that each appeal will take three years to be heard, the full horror of the picture becomes clear.
As Webber continues, “Thousands of rate payers unhappy with their rates bills are therefore not only stuck in the Checks and Challenges section of CCA waiting to be dealt with, but even when they finally reach the appeals stage only a very few are getting through.
This will have far reaching consequences, particularly for mainly retail businesses who rely on their refunds following appeal in their financial planning. Cash is the lifeblood of such businesses and it is appalling that the Government has not done more to correct the system.”"
"The VOA/VT need to be properly resourced to deal with this crisis."
To add even further to the delays, Webber claims that the VOA is now focusing on values for the forthcoming the 2021 Revaluation and case workers are being re-assigned from appeal work to deal with this. “This lack of man power at the VOA certainly gives us concern that the situation will deteriorate further particularly as 2018/2019 and 2019/20 build up further rates rises."
According to some commentators, should CPI figures for September be as predicted, this will increase the Business Rates Bill by £660 million next April when increases come into play in line with inflation. This will mean rises of £170 million predicted for the retail sector alone, a sector already struggling with current rates levels.
"We have long been advocates of business rates reform," concludes Webber, "And a decent appeals system with a properly resourced VOA and VT is a fundamental plank of our manifesto. The system appears to be spiralling out of control and sadly it is businesses on our high street that will continue to suffer particularly if they are unable to properly appeal against their rates bills or claim their refunds. The Government continues to fiddle around the edges as the high street burns. 13 appeals in three months with 40,000 expected for the 2017 list alone is a seriously unfunny joke in a period of retail distress.”