Retail, hospitality and leisure businesses have not been paying any rates during the pandemic, as part of a 15 month-long relief which runs to the end of June this year.
Many of those ineligible for reliefs have been appealing for discounts on their rates bills, arguing the pandemic represented a ‘material change of circumstance’ (MCC).
The government is making clear today that market-wide economic changes to property values, such as from COVID-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out COVID-19 related MCC appeals.
Instead the government will provide a £1.5 billion pot across the country that will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values, ensuring the support is provided to businesses in England in the fastest and fairest way possible.
Allowing business rates appeals on the basis of a ‘material change in circumstances’ could have led to significant amounts of taxpayer support going to businesses who have been able to operate normally throughout the pandemic and disproportionately benefitting particular regions like London.
Chancellor of the Exchequer Rishi Sunak said:
“Our priority throughout this crisis has been to protect jobs and livelihoods. Providing this extra support will get cash to businesses who need it most, quickly and fairly.”
“By providing more targeted support than the business rates appeals system, our approach will help protect and support jobs in businesses across the country, providing a further boost as we reopen the economy, emerge from this crisis, and build back better.”
Secretary of State at the Ministry for Housing, Communities and Local Government Robert Jenrick said:
“Throughout the pandemic we have provided unprecedented support to businesses.”
“Today we are going even further with an extra £1.5 billion for councils to provide additional targeted support to those businesses that have not already received rate relief.”
“This is the fastest and fairest way of getting support to businesses who need it the most.”
“We are also acting to ensure businesses have certainty over their bills and councils have certainty over their funding so they can continue to support their communities and deliver quality local services.”
The £1.5 billion pot will be allocated to local authorities based on the stock of properties in the area whose sectors have been affected by COVID-19.
Local Authorities will use their knowledge of local businesses and the local economy to make awards.
The Government will work with and support local government to enable ratepayers to apply as soon as possible this year, once the legislation relating to MCC provisions has passed and local authorities have set up local relief schemes. By contrast, individual appeals based on MCCs could have taken years to resolve in some cases.
Around 170,000 businesses have made claims for MCCs.
Initial claims were confined to a discrete cohort of properties and handled by the Valuation Office Agency, but claims multiplied as the pandemic and public health measures evolved.
Covid restrictions have affected all or nearly all commercial properties in England – well beyond the scope of any previous application of the MCC provision.
A core principle of the business rates system is that economic factors are captured at revaluations, with the MCC system usually applying to issues such as physical changes to the property or surrounding area – for example significant roadworks near a property that affect its value.
Business rates are devolved so the devolved administrations in Scotland, Wales and Northern Ireland will receive an additional £285 million through the Barnett formula as a result of today’s announcement.