With the Non-Domestic Rating Act 2023 receiving Royal Assent in late October, businesses should be aware of the anticipated changes to the business rates system that it will bring, and the potential implications that it will have on them.

In our latest viewpoint, Stephen White in the business rates team examines the act in more detail and the key points for ratepayers.  

From Royal Assent (effective immediately)

• Three-yearly revaluations 
  To bring rateable values (RVs) closer to rental values, aside from any further legislation, business rates revaluations will take place every three years, with the next revaluation due in 2026.

• Discretionary relief 
  The restriction preventing billing authorities from awarding discretionary relief to a ratepayer more than six months after the end of a financial year has been removed. From 1st April 2024, there will be no restriction in respect of rate year 2023/24 onwards. This should hopefully provide increased fairness to the ratepayer in such scenarios.

• Transitional relief  
  The requirement for transitional relief schemes to be self-financing has been removed, and the government has confirmed the scrapping of ‘downwards phasing caps’. For properties that have seen significant RV decreases between rating lists, continuation of no downward phasing would be welcomed (as already experienced under the 2023 rating list).

• Material change of circumstances 
  Grounds for ‘material change of circumstances’ (MCC) have been revised. Changes in legislation, licensing regimes, and guidance from public bodies are no longer to be considered valid grounds when seeking a temporary reduction to a property’s RV. It is anticipated that the scope for ratepayers to appeal on MCC grounds is to be narrowed.

From two months post-Royal Assent (before the end of 2023)

• Completion notices for ‘new’ buildings 
  The completion notice procedure has been revised and councils will  be able to serve a completion notice on refurbished buildings to be re-entered into the rating list regardless of any structural alterations having taken place. This amendment closes a previous lacuna in the law and landlords will need to be mindful of implications of potential re-assessment during the lifecycle of a building.

Effective from 1st April 2024 (new rate year)

• Improvement relief 
  From 1st April 2024, subject to regulations, improvement relief will come into effect. This measure is to provide relief against an increase in RV following improvements made to a commercial property, for 12 months post completion of the works. 
  
  Ahead of the billing cycle for the next financial year, the government is to lay finalised regulations (i.e. eligibility requirements, including that a ratepayer must remain in occupation during works and the ‘definition of qualifying works’). The provision is due to last until 2029. Until finalised regulations are published, it is difficult to gauge how beneficial for ratepayers this relief is likely to be.

• Multipliers linked by default to consumer price inflation
  Ahead of billing for 2024/25, the government will commence provisions to ensure that annual increases in the small business multiplier and the national non-domestic multiplier are automatically linked to the Consumer Prices Index (CPI), rather than the Retail Prices Index (RPI).
  
  Government regulations will also be able to ensure that either multiplier is indexed by a figure less than CPI, and to determine which ratepayers are entitled to the small business rates multiplier in England. Inflation remains stubbornly high and the government has a difficult decision to make when setting the multiplier for the new financial year. 

Subject to future commencement regulations (timings TBC)

• Duties on ratepayers to provide information to the VOA and HMRC 
  To support the delivery of more frequent revaluations, businesses will be obliged to provide information to the Valuation Office Agency (VOA) via a new online portal, termed as ‘Duty to Notify’ and ‘Annual Confirmation’.
  
  Commercial occupiers (in rateable occupation or entitled to possession), will be under a duty to provide information after certain events, within 60 calendar days, such as any changes to a property or lease terms. Ratepayers will also need to make an annual confirmation that data held by the VOA about a premises is correct. A sanctions regime is due to be introduced, potentially with punitive financial penalties for non-compliance, or if false information is provided ‘knowingly or recklessly’. There will be an appeals process.
  
  For the purposes of linking of tax and property data, ratepayers will also be required to provide HMRC with a taxpayer reference number (such as a self-assessment or corporation tax unique reference number). It has been outlined that these duties will be operated through a single online service and their introduction will follow a soft launch, a public information campaign and user testing. The impending duties on ratepayers to provide information to the VOA and HMRC are anticipated to equate to a significant administrative burden for the ratepayer.

We are also expecting to see gateways for the following:

• VOA to share information with ratepayers
  The VOA will be able to share greater information with ratepayers to how RVs have been determined. It is hoped this will provide greater transparency and fairness across the rating system.

• HMRC to share information with billing authorities
  A new gateway will support data sharing between HMRC and billing authorities. This is part of the government’s wider plan to link tax and property data, with the underlying aim of modernising business rates.

Conclusion

Most of the changes listed have been anticipated following consultations over the last two to three years. On one hand, it is recognised that modernisation of the tax regime continues to move forward, with an approach to tidying up the relief regime along the way. On the other, in particular the impending duties on ratepayers to provide information to the VOA and HMRC are anticipated to equate to a significant administrative burden for the ratepayer.

We are well placed to advise in respect of the changes to be brought about by the Non-Domestic Rating Act 2023. For a detailed analysis of your 2023 rating list RV and rating advice, contact a member of our business rates team.