All the signs are that the new Westminster Government will now be seeking reform to business rates as a means of generating local tax revenues in England, at the latest by 2022.
This has the distinct benefit of securing valuable tax benefits through self-certification and forcing ratepayers to accurately submit their own property valuations with limited civil service supervision or costs.
The benefit of any type of property tax is that it is immune from evasion because it is impossible to hide bricks and mortar. Business rates are a central feature of tax on real estate across the whole of the UK, realising £30bn to Governments in England, Wales, Scotland and Northern Ireland.
At the moment it costs the Westminster Government somewhere in the order of £55M per annum to employ the Valuation Office Agency to deal with the preparation and defence of a 5 yearly revaluation and the Government now seems even more determined to reduce that cost.
In England and Wales the VOA employs 3,600 staff across 5 main regional offices (although they are tasked with reducing their budget by a third as part of the spending review). Rateable Values are subject to periodic reviews (revaluations) with the next one due in April 2022. Rateable Value assessments (i.e. rental values) are subject to a nationally imposed multiplier and councils have a statutory duty to charge and collect rates annually.
The unusually long delay in revaluation (7 years) combined with a lethargic appeal system has led to the increasing unpopularity of rates. The Government now appears ready to shrink the VOA to an absolute minimum and this signals the advent of self-assessment by 2022. Although a departure from longstanding principles, we believe that such a system is workable in line with a system first muted 15 years ago, and would require the preservation of an appeals regime. Self-assessment would require mandatory submissions by ratepayers, subject to receipt and ‘objection’ by the VOA as guardians of fairness.
A system of self-certification could work subject to a system of 5 yearly ratepayer valuations and a VOA initiated annual review (see diagram below).
The advantages of self-assessment can be summarised as follows:
- Cheaper for Government to resource.
- In line with self-assessment of other UK taxes.
- Professional rules could be applied to valuations for rating.
- Predictability for ratepayers.
- Potential lack of consistency.
- Possible deliberate under-assessment.
- Additional cost to ratepayers of professional fees.
- The unknown.
The inevitable consequence of the CCA regime is a step further towards full self-assessment by ratepayers. The Government is determined to eradicate uncertainty, evasion, bureaucratic cost and the prevalence of unscrupulous ‘rating advisors’.
The potential for taxpayers to self-assess with supporting data will grossly reduce the need for an unwieldly civil service and a drawn out appeals regime, but it will place a serious onus on ratepayers at the point of self-certification.