Business rates self-assessment would save councils £1.75bn – LGA
Business rates should be reformed even further by allowing companies to self-assess their rateable value to keep councils from footing refund bills, the LGA has said today (6 November).
The association said the recent shake-up of business rates makes it imperative for further devolution to protect authorities from the risk of appeals, which it claims has affected nearly one million companies since 2010.
Under the LGA’s proposed reform, Whitehall would hand businesses the right to self-assessment in the Spending Review and allow the Valuation Office Agency (VOA) to challenge their bill after it is finalised.
This could ensure businesses are paying a rate they deem fair, while still allowing the VOA to appeal if not – helping increase certainty over oscillating incomes and potential refund costs. Local authorities currently have to cover half of all refund bills.
According to the LGA, this process could be done online and self-assessment would not be mandatory. Firms that choose not to self-assess would only have three months to appeal.
The LGA also claims this would cut down on government red tape and bring business rates in line with other self-assessed taxes such as VAT.
Councils argued that 900,000 firms have challenged their rates bill in the last five years, with around 330,000 appeals still left undecided. The high costs tied to risk of appeals and refunds have allegedly forced councils to divert £1.75bn from public services.
These costs could drive councils to “divert more of their limited resources” when the next national revaluation occurs in 2017, and could potentially soar when they start being liable for all refunds.
Cllr Claire Kober, LGA’s resources portfolio holder, said: “By 2020, local government will retain all of its business rates income, which will provide a vital boost to high streets and investment in infrastructure and public services. However, it will also mean councils will be liable for 100% of refunds.
“This makes reform of the appeals system even more urgent to protect councils from the growing and costly risk of appeals and ensure businesses are happy with what they pay.
“Our self-assessment business rates proposals would free [councils] to use the money put aside to cover the risk of appeals to fund vital services and help plug growing funding gaps.”
To support its case, the association cited the recent “damaging appeal” resulting from Virgin Media’s attempt to merge business rates payments across the country. The LGA said this nearly forced councils to dish out £225m.
And a handful of GP surgeries have also recently secured a legal ruling to reduce their rateable value by more than 60%, which the association fears could have a ripple effect nationwide as 1,600 similar surgery appeals are still unresolved.