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Government must focus on consequences for local authorities in business tax overhaul, says London Councils

  • By London Councils

Local authorities must not come second to the needs of businesses as the government considers increasing the frequency of business rates revaluations, London Councils has said.

In its response to a Treasury and DCLG consultation, the think-tank and lobbying organisation said it was concerned that government had been too focused on what would “work better for businesses” rather than equally considering the impact on local authorities.

Under current arrangements – where local government retains 50% of the business rates it raises and revaluations take place every five years – councils have to reserve substantial portion of their budgets for potential losses from businesses appealing their tax bills.

By April 2017, councils in London will have set aside approximately £1.3 billion – money that could otherwise be used to deliver public services.

Mayor Jules Pipe, Chair of London Councils, said: “While we are supportive of an overhaul of the appeals system and the need to resolve it before local government moves to 100% retention, the government must pay close attention to the effect these proposals could have on vital public services, not just on businesses.”

“In the capital, some authorities have as much as 40% of their business rates income trapped in a lengthy appeals process, leading to significant financial risk. If this continues into a new system of more frequent valuations, services that rely on this funding may not be delivered.

“We need to create a system that is fair and one where councils are provided with the opportunity to grow their business rates tax bases and benefit from that growth. We are now urging Government to take on board our recommendations.”

In its consultation response, London Councils also said:

  • Government should explore the possibility of ‘de-coupling’ London from the national valuation system to strengthen growth incentives outside the capital, and stop London’s economic growth artificially constricting rateable values in the rest of the country.
  • The Valuation Office Agency must be properly resourced to carry out its duties if revaluations are to take place more regularly. Under the current system, the backlog of appeals shows that the capacity of the VOA is inadequate.
  • It would welcome the introduction of an effective system of self-assessment to allow business to rate their own properties as long as the requirements on firms were proportionate to the value of their properties. This would reduce the risk of appeals. 

Ends

London Councils' full consultation submission can be read here.

Notes to Editors

  1. As part of the 2016 budget, government announced it will aim to introduce more frequent (at least 3 yearly) revaluations of properties in England for business rates purposes.