Could Covid be the catalyst for business rates’ reform?

The economic impact of Covid-19 could radically transform the business rates’ system which has operated since the 16th century.

Ratings specialist Martin Cook, who has been with KWB for more than a decade, believes the traditional concept of basing rates on property values may not survive much beyond the current crisis.

“It’s always been an anomaly of the current system that the most profitable companies often pay the least rates, and the impact of Cov-19 on our economy, on established business models and on wider perceptions about fairness, could well sweep away the present system,” he suggests.

Martin was speaking after Robert Jenrick, Minister of Housing, Communities & Local Government, announced that the government had postponed its revaluation of business rates scheduled for 2021.

“It was originally going to be 2022, but then the government decided to bring it forward by a year. Given the economic fallout we’ve already seen, and with much more to come, it makes absolute sense to defer the revaluation and return to their default position,” he says

“However, I still wonder if the revaluation will go ahead during 2022 – or go ahead at all. They might choose to overhaul the whole business rates system, and create something radically different from what we have now.

“Even if we try to think beyond the crisis, and about how the business community might start to look, it’s unrealistic to imagine the revaluation can proceed as the government hopes.

“The valuation point for assessing rates is April 1 2019, so almost every property owner will be aggrieved if, just as they’re trying to rebuild their brand, their business and their balance sheet, they’re asked to pay rates based on a period when the economy was prospering.”

Martin says the industry is well aware that the resources of the Valuation Office, which would hear challenges to rating values, were over-stretched long before Covid-19.

“It’s an open secret that they were struggling to cope. If you factor in the impact on their workload when thousands and thousands of companies, especially those unable to trade as they weren’t considered essential, lodge appeals based on ‘changing circumstances’, they’ll be overwhelmed,” he predicts.

“It’s theoretically possible that the High Court could decide the economic impact of Covid-19 isn’t a valid reason to appeal against a rating assessment, but that isn’t very likely.

“As the economy begins to reshape itself, the trend for online retail increases and ‘bricks and mortar’ companies come under even greater pressure, I think everyone involved in our industry, and the business community, will place huge pressure on the government to devise a new and fairer business rates system.”

    Martin Cook, KWB, Head of Valuations and Lease Advisory - providing lease negotiation and business rates advice