COVID-19 & Business Rates – what are the options?
This has been and continues to be an unprecedented period for businesses across Scotland and one which is arguably having a disproportionate effect on the north-east economy. The chances are your business has been negatively affected in some way by the coronavirus pandemic. Operationally, fixed property assets will have been reviewed and in many cases closed up completely. What does this mean for business rates and what can businesses do to alleviate the rating burden during this challenging time? The effects of the pandemic have naturally dominated the headlines but there are opportunities that may be missed.
Many businesses at this time of year have usually received their unsightly business rates bill for the financial year, which is an untimely reminder of just what a hefty burden a full year of rates looks like. You may be wondering where your 2020/21 rates bill has gone and are optimistically hoping that the government has decided to suspend all rates. Fear not, they are on their way! The delay has been brought about by the pandemic as local authorities have focussed on the Coronavirus Business Support Grants and getting to grips with the relief schemes introduced by the government in direct response to COVID-19. There is some positive news for all, a 1.6% universal reduction in all rates liability for this financial year. The reality, however, is that this only reverses the increase to the national rates poundage from 0.49p to 0.498p. Many businesses will not therefore see any real reduction in their liability. Much more positive for those businesses in the retail, hospitality, aviation, and leisure sectors, all of which will see 100% relief applied for this financial year so long as the property was and remains occupied. It is therefore important that once rates demand notices arrive that they are scrutinised for accuracy and where a business feels there are errors or that relief has not been applied they should seek advice.
Regardless of relief, there is another avenue to seek a reduction in rates through the appeal process. The appeal regulations contain a provision to appeal on the grounds that there has been a material change of circumstances that has affected the value of the property. As part of the same legislation, if it can be proved that the beneficial occupation of the property has been affected then this may also legitimise a challenge. Past experience has shown, along with established case law, that a pandemic such as COVID-19 can constitute a material change of circumstances in terms of the appeal regulations. If you haven’t considered this avenue already then it is certainly recommended to pursue it as successful outcomes could result in substantial savings in rates. This applies to all sectors including those that may receive full relief this year as once the relief is removed then the normal liability will resume. Some 50,000 appeals have been submitted across Scotland so there is plenty of weight behind the arguments.
Another argument worth considering is whether the restrictions imposed by the government under the Health Protection (Coronavirus Restrictions) (Scotland) Regulations 2020 constitute a “prohibition in law” on the occupation of property. If this can be demonstrated then rates relief may be available from the local authority. It is therefore recommended that businesses evaluate on how their occupation of premises has changed during this pandemic – if it is significant then they should seek professional advice.
Businesses should also stay alert to adjustments in their rateable value which may be brought about following development works on existing subjects, such as extensions and renovations. Should your rateable value be adjusted then a Valuation Notice will be issued followed by a revised rates bill. This change in value can also be challenged through the appeals process and it is always worthwhile having a valuation fully audited to ensure it is fair and reasonable. There is also potential to claim rates relief following an increase to rateable value, but note that any available reliefs are not automatic and must be applied for. If in doubt, seek advice.
Amongst the chaos of the pandemic, other opportunities and recent changes to the rating system may be overlooked. Following the Barclay Review of business rates in Scotland, a new Act came into effect on the 1 April 2020 – the Non-Domestic Rates (Scotland) Act 2020. This has brought about important changes to the rating system that ratepayers should familiarise themselves with. Of particular note, significant penalties have been introduced for non-compliance with Assessor Information Requests (e.g. rental or cost-based information), which are regularly issued. These will be severe for continued breaches and the fines are cumulative so could equate to 71% of the Rateable Value of the property. There will be an opportunity to appeal against any fine to the local Valuation Appeal Committee, but proactive action to prevent this course of action is clearly prudent.
Looking ahead, the new 2020 Act introduces more regular revaluations on a three rather than five year cycle, to be introduced following the next scheduled revaluation on 1 April 2022. This too is now highly contentious as the 2022 Revaluation will be based on values prevailing as at 1 April 2020, just when the virus was playing havoc. What will this mean for the next revaluation? Will it even take place? Will the valuation date be altered and, if so, when should it be? This will be an anxious wait for ratepayers as any postponement to the revaluation could result in businesses across Scotland, but particularly those in the north-east, being left with disproportionately high rateable values in comparison to real and much lower market values. It’s beginning to look like history repeating itself when the 2015 revaluation was postponed by two years, when north-east businesses saw huge increases to their rateable values despite the collapse in oil prices. FG Burnett has made it clear to the Scottish Government that the 2022 Revaluation must go ahead so that values can be adjusted to reflect the profound changes in the market.
The message is – stay alert, be proactive, take action. FG Burnett is supporting businesses through the pandemic so please do not hesitate to get in touch with our Head of Rating, Richard Foster firstname.lastname@example.org to see if we can help.