Property consultant Altus Group is bringing what it has described as a ‘class action’ against the Valuation Office on behalf of its clients to reduce their business rates bill due to the coronavirus lockdown.
Business rates are a statutory tax levied by central government on commercial property such as warehouses, shops, factories and pubs and is collected locally by the Council from owners and tenants.
The government via the Valuation Office sets the multiplier – a pence in the pound value – which is then applied to the rateable value – an estimate of the open market rental value a property could achieve on a specified date.
Altus Group, head of UK business rates Robert Hayton, said it was this ‘open market rental value’ which has suffered ‘a material change in circumstance’ due to the coronavirus crisis.
The company is representing some 55,000 clients involving around 75,000 premises, which they claim have suffered this Material Change in Circumstance, which is having a profound effect on the rental value of their properties.
Should Altus Group be successful it would mean its clients, which include logistics companies and those in the supply chain, would in effect have their business rates bills reduced and even nullified for the duration of the disruption caused by the corona virus crisis.
The government has already introduced a business rates holiday for businesses in the retail, leisure and hospitality sectors to help them through disruption caused by Covid-19. These businesses won’t have any business rates to pay in 2020-21. Nurseries in England will also get a year off paying business rates for tax year 2020-21.
Altus Group head of UK business rates Robert Hayton said: “It’s not just those sectors that have been affected. Every business has been to a lesser or greater degree. There may be logistics operators who cannot operate because their clients are in the hospitality or leisure sectors. Food producers who supply schools and other commercial business rather than direct to the consumer etc.”
The action is being taken rather than a series of individual actions to add weight and power to the argument in order to put the onus on central government to take action rather than local authorities.
When the government steps in to provide discretionary relief, as it has to the retail, leisure and hospitality sectors it underwrites any loss of income for local councils which are the main beneficiaries of business rates, if a local council was to offer discretionary relief it would have to fill the funding gap itself.
Hayton said: “We want to work collaboratively with the Valuation Office to sort the situation out to ensure that values are corrected swiftly rather than a long period of conflict.”
In 2018–19, £31 billion of government income was raised through non-domestic property rates. Generally, business rates are difficult for a business to avoid. According to Jesse Norman MP, the Financial Secretary to the Treasury: “The [business rates] system collects 98% of the tax that is due. Very few other taxes do that, anywhere in the world.”