Business rates and Covid-19: restriction on material change of circumstances claims and additional relief
On 25 March 2021, the Government announced measures with immediate effect to limit the use of the Material Change in Circumstances (MCC) provisions to achieve reductions in the rateable value of properties between valuation dates. The Government’s position is that Covid-19 and the response to it is not an appropriate use of MCC provisions. The legislation operates to disregard Covid-19 and the Government’s response to it when determining rateable value in MCC claims.
The Government says the reason for this change is concern that the valuation system will grind to halt as it works through numerous claims. This would mean the Valuation Office Agency would not be able to adequately prepare for the 2023 revaluation to the detriment of all ratepayers. There is also concern that use of MCC provisions will lead to taxpayer support going to businesses based in offices that have still been able to operate successfully through the pandemic such as banks, large online retailers, tech businesses, law firms and consultancy firms. The changes are likely to prove highly controversial among the rating community given this is a significant change to the existing law which prevents legitimate MCC claims being progressed. In effect the goal posts have been moved part way through the match. This is particularly the case given the abortive discussions late last year to agree a £25,000 allowance for MCC cases between ratepayer representatives and the Valuation Office Agency.
The Government has also confirmed that primary legislation will come forward to ensure that the impact of the Government’s response to Covid-19, including requiring businesses to close their doors, will be reflected at the 2023 valuation (which will be based on 2021 rental values). This will be of comfort for all businesses, but the detail will be key and given that the valuations will be as at next week’s values there is uncertainty as to how those valuations will be possible in view of the lack of market evidence.
The proposed changes also aim to protect local authorities from uncertainty about their financial position particularly around whether they would need to return money spent on their response to Covid-19, and how much.
In recognition that businesses outside the retail hospitality and leisure industries (which already benefit from Covid-19 rates relief) are adversely affected by the pandemic the Government has announced a further £1.5 billion of additional support for businesses that have not already benefited from relief. The funding will be allocated to councils taking into account the economic impact Covid-19 has had on specific sectors. It is intended that local authorities will use their knowledge of local businesses and the local economy to award the relief to the businesses which need it most.
The change to the MCC provisions came into force on a prospective basis yesterday and primary legislation to bring in the changes with retrospective effect will follow as soon as parliamentary time allows. The £1.5 billion of relief will be available to businesses as soon as possible this year.
The Government’s position is that the changes balance the need to keep the rating system functioning with ensuring businesses in need still secure relief where possible. Whilst action to alleviate the delays caused by the volume of MCC claims was undoubtedly needed, the changes delay resolution of the impact of Covid-19 on the rateable value of business premises up and down the country. Whilst the additional relief will be welcomed by those businesses who receive it, the delay in resolving questions over the true rateable value of their property will be frustrating for others. The likely losers from the changes to the MCC provisions are businesses that may have been able to use the MCC mechanism to secure lower rates bills such as professional services firms but are unlikely to be granted the additional relief.
