Business rates relief - what could you be entitled to?

14 Dec 2021

The liability for business rates, which are sometimes equal to the rents payable for the commercial premises in question, has been brought into sharp focus during the pandemic. It is, no doubt, some comfort for the retail, hospitality, and leisure sectors who have been afforded 100% business rates relief during the pandemic , that relief will continue into next year (2022). Saying that, it will be reduced to  50% from April 2022 through to March 2023; and there will be a cap of £110,000 per business (and notably not per property). So, if you are a retailer, for instance that has a number of shops, then that cap will limit the amount of relief across all those premises.
There are then the businesses that are not operating within the retail, hospitality and leisure sectors, such as office occupiers. Many of these applied to challenge their business rates by what is called a material change in circumstances (“MCC”) appeal. This, ordinarily, enables the levels of rates payable to be reduced if property values have decreased as a result of, for example,  changes in the physical state and enjoyment of the property or its mode and category of occupation. Many, quite understandably, considered that the pandemic was an obvious catalyst for such appeals.  However, the government has recently put a stop to those types of appeals.  The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill has reached the  House of Lords and is expected  to come into law relatively soon. It provides that, in the making of relevant determinations in relation to MCC appeals, no account is to be taken of any matter, whether arising before or after the passing of the new law, that is directly or even indirectly attributable to coronavirus. It will, therefore,  apply to appeals that have already been made as well as future applications.
In terms of why the government has made this move, its justification is that market-wide economic changes in property values, such as those that have come from Covid-19, can only be properly considered at the general business rates re-evaluation stages. As from 2023 these will be three yearly, and not at independent appeals throughout those periods. It has also earmarked a £1.5 billion “pot” to assist with rates bills that it will distribute across the country according to which sectors have suffered most economically during the pandemic. This pot will be allocated to local authorities based on the stock of properties that they have in their areas and those sectors that have most been affected by Covid-19. Local authorities will make awards using their knowledge of local businesses in their area and the local economy.
It is unlikely that all those occupiers who could have succeeded in their MCC appeals will get a share of this pot.  The government has provide two illustrative case studies as to how this pot will be awarded. The awards will be made irrespective of whether the property in question could be occupied or not; it is all about whether the occupier could continue to operate as a business. It is not designed, therefore, to help the office occupier whose business could continue to function even though they were not  running it from their office but everyone was working from home. It is more about, for example, the warehouse tenant that could still occupy its unit because they could cater for social distancing, but there was not the demand for its goods, which had fallen off a cliff during the pandemic.
In terms of when the pot will be available, all we have so far is the government’s announcement  "We'll work with and support local government to enable rate payers to apply as soon as possible this year."

Read our other predictions for 2022

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