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Wed 8th Sep 2021 - Legal Briefing

Navigating the minefield of business rates by Michelle Hazlewood

Businesses need to ensure that they are fully equipped for the coming autumn and winter months, and operators must turn their attention to the components which can prompt significant costs to arise unexpectedly. Business rates and the process of entering into a new contract can be the potential culprits of these situations, so avoiding these blips will be essential for a successful end to the year.

The hospitality industry is currently requesting that the government conducts a significant reform of business rates. We remain in the same regime as before the pandemic, and a quick fix is doubtful. Hopefully though, reform is more likely to happen than previously, considering the range of concessions offered over the last 18 months to compensate for the strain of the pandemic. The Valuation Office Agency (VOA) is currently issuing correspondence to businesses in order to collate data, which is being undertaken as part of the standard two-year rotation of assessments for the new rateable values. 

Many operators have commented to me that their valuation should be amended at far less than usual. As a consequence, they believe they will also pay less than previously due to the decimated turnover of the last two years. Unfortunately, it’s not so simple and does not work this way. The valuation is set on what is fair and maintainable trade, which is not representative of the last 18 months. As much as past revenue is an indicator, it is not a definitive basis and may not have a material impact upon the valuations which are set. This is particularly relevant as the VOA can look back over three years of information, which would include 2019 and “standard” trading figures.

There is also a concern from those experienced in hospitality valuations that the limited reliefs for venues may not be issued and readily available in the future. Both rural and small business relief is discretionary and under the control of local authorities, who are now confirming the extent of their debt and heavy use of reserves that were spent trying to combat the pandemic. There is no doubt that local authorities will be looking for opportunities to claw back funds.

Since 2019-20, the government has provided a business rates retail discount for retail properties, and more recently, from 2020-21, it expanded this discount to include the leisure and hospitality sector. Sadly, from 1 July 2021 to 31 March 2022, this discount has been reduced to 66%. As much as the industry is starting to feel a level of normality, it is still dealing with the scars and would have benefitted from this continued concession. We would also like to see improved systems in place that these rebates are implanted within. 

Mike Hughes, a chartered surveyor dealing with business rates, said: "We are dealing with a number of business rates enquiries following the easing of the lockdown, and both the VOA who calculate business rates value and the local councils that collect the business rates invoice payments are being stringent in their adherence to the procedure. If a business is asked to provide information to the VOA they should remember that this information will be used when the next revaluation takes place in 2023. Business rates relief are in many cases discretionary, and so businesses should check their local council invoices to ensure they are receiving all the relief they may be entitled to."

The financial impact of the business rates means operators may need to seek assistance in order to efficiently navigate the procedure. This would appear to be a sensible approach, but a word of caution needs to be raised regarding rogue business rates agents. There are many companies and individuals who offer to help, claiming they can achieve massive rates reductions, but fail to deliver despite entering contracts with operators which require an upfront payment. This occurred earlier this year when a rumour circulated that the VOA had agreed to a 25% reduction to all those raising a material change of circumstances appeal. This offer did not exist, but many small businesses signed contracts to pursue this and unfortunately received nothing.

Others have paid considerable sums for advice to secure reliefs that they are entitled to as standard, with no professional input required. It has been debated in parliament, and while calls for protection of the vulnerable appear to have been heard, they have not yet been actioned. Ideally, persons providing such advice should be part of a professional body – just like all solicitors, accountants, and financial advisors – so that this inappropriate behaviour can be properly sanctioned. Remember, you should check if upfront payments will be returned if no benefit is secured. 

The best advice is to seek support with parties who are known, recommended or members of a professional body. In this case, they should be part of the Royal Institution of Chartered Surveyors and you should request to see their professional indemnity insurance. Carefully examine the wording of the agreement and take the time to review and reflect. Some agents offer long contracts and charge up to 52% of the saved amount annually for the duration of the contract. If you try to leave the commitment early there will be penalty fees. The same applies to any new supplier contract.

If a deal is too good to be true it probably has a catch such as an extended-term, difficult termination procedure, or hidden extras. Coming from myself, a solicitor who worked in litigation before licensing, there are a great deal of people who seek advice because they have been sued for breach of a contract or seek to sue for non-compliance after relying on what the sales representative or agent has said. Often, they have never looked at the paperwork except when signing for it. Consumer protection is very limited when buying as a business, and so it is always better to play it safe.
Michelle Hazlewood is a partner at John Gaunt & Partners
John Gaunt & Partners is a Propel BeatTheVirus campaign member

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