Thousands of companies across the UK may be paying too much in business rates, with experts urging a comprehensive review of their current valuations. The complex system, which taxes commercial properties based on their rental value, has long been a point of contention for businesses, particularly those on the high street struggling with rising costs and changing consumer habits.
Business rates are a significant overhead for many enterprises, calculated using a 'rateable value' assigned to each property by the Valuation Office Agency (VOA). This value is meant to reflect the property's open market rental value at a specific date. While a nationwide revaluation came into effect in April 2023, based on values from April 2021, the dynamic nature of the property market and the specific characteristics of individual premises mean that some businesses could still be assessed incorrectly.
Property tax specialists and industry bodies are highlighting that many businesses are unaware they could be eligible for reductions or rebates. They advise companies to carefully examine their rateable value and compare it against similar properties in their area. If discrepancies are found, businesses have the right to challenge their valuation through the VOA's 'Check, Challenge, Appeal' process, although this system itself has faced criticism for its complexity and length.
The current system has been criticised by various organisations, including the British Retail Consortium and the Confederation of British Industry, for placing an undue burden on physical premises and disproportionately affecting high street retailers. Critics argue that the tax disincentivises investment and job creation, especially in an era where online retail continues to grow without facing comparable property-based taxation. There have been ongoing calls for a fundamental reform of business rates, with suggestions ranging from a shift to an online sales tax or a land value tax.
While the Government has introduced some measures to mitigate the impact, such as retail, hospitality, and leisure relief, and a freeze on the business rates multiplier for smaller properties, the underlying structure remains contentious. The Secretary of State for Levelling Up, Housing and Communities, Michael Gove, has acknowledged the need for a fair and efficient system, but significant structural changes have yet to materialise. The Labour Party has also committed to reforming business rates, proposing a new system that would 'level the playing field' between online and physical businesses.
Businesses that believe they are overpaying should seek professional advice to navigate the appeals process. Successfully challenging a valuation can lead to substantial savings, backdated in some cases, providing much-needed relief in the current challenging economic climate.
Source: Valuation Office Agency, British Retail Consortium, Confederation of British Industry