Government offers £1.5bn rates relief but spurns Covid-19 appeals

The government is set to provide a further £1.5bn support package for businesses missing out on Covid-19 rates relief, but intends to legislate against appeals for rates bills citing a pandemic-led material change in circumstances. HM Treasury said “market-wide economic changes to property values, such as from Covid-19, can only be properly considered at general rates revaluations” and that it will “therefore be legislating to rule out Covid-19-related MCC appeals”. The next revaluation is in 2023. A £1.5bn pot will instead be distributed across England according to the sectors that have “suffered the most economically”, rather than on the basis of property value declines. This will be allocated to local authorities based on the stock of properties in the area where sectors have been affected by Covid-19, to make awards where they see fit. Around 170,000 businesses have made claims for MCCs. The government said it will support local government to “enable ratepayers to apply as soon as possible this year”, once legislation relating to MCC provisions passes and local authorities have set up local relief schemes. It added that individual MCC appeals otherwise take “years to resolve in some cases”. ‘Prescribing paracetamol to treat a fractured leg’ The decision has been heavily criticised by the industry. Jerry Schurder, head of business rates at Gerald Eve, estimated that £1.5bn equalled just 7.5% of the annual rates liabilities of potential claimants, and will therefore “come nowhere near to addressing the impact of the pandemic on firms’ ability to pay their rates bills”. “This is the financial equivalent of prescribing paracetamol to treat a fractured leg,” said Schurder. “There are also clear and worrying gaps in the plan – not least that the administration is once again going to be outsourced to local authorities – who are already over-stretched – without any guidance as yet on how this fund should be distributed. “Those with experience of discretionary relief schemes will not have much confidence in the funds being divvied up quickly or equitably.” Robert Hayton, UK president of property tax at Altus Group, said it was a “catastrophic blow” for businesses that have “spent the last year lawfully pursuing business rate adjustments only to have their statutory legal right ripped from them”. ‘Deeply shocking’ David Jones, principal and managing director of business rates at Avison Young, said: “The government has largely let businesses down in not returning the [£8bn-plus] overpaid rates for occupiers unable to viably occupy their premises during the pandemic. “The latest announcement of a disappointing £1.5bn pot is targeted only at those worst affected and has left it to billing authorities to decide who those businesses are, leaving many in limbo. “For everyone else, the government will legislate to remove the most significant material event in history. Businesses – most notably office occupiers – will have to pay full rates despite not being able to occupy their premises, which goes against everything that is fair in delivering an equitable tax system and will be detrimental to many. “This is akin to paying full corporation tax against profits you have not made. Does the government see business rates as the proverbial cash cow?” John Webber, head of business rates at Colliers International, said: “The government is ripping out the rule book retrospectively. It is the wrong thing to do on every level. “The government’s Valuation Office Agency spent the last part of last year negotiating with the agents of ratepayers on the impact of Covid-19 and its effects on businesses, following the government’s working from home and social distancing policies and agreed these constituted a MCC… by which businesses would be able to claim a rebate on their rates bills. “To now deny this is a MCC retrospectively, because the numbers are too high[,] is deeply shocking.” He said that £1.5bn will “will not even scratch the surface for businesses struggling to pay their rates bills from last year”.   To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette