Business rate payers cannot claim 'material change of circumstance'

Business rate payers adversely affected by Covid-19 are to get a £1.5bn discount on their bills but will not be able to claim for material change of circumstance to reduce rates bill

Many of those that did not qualify for reliefs under the government’s covid-19 rates relief for businesses in retail, hospitality and leisure, for example, have been appealing for discounts on their rates bills, arguing the pandemic represented a ‘material change of circumstance’ (MCC).

The government will not accept this argument and plans to legislate against the use of the material change of circumstance arguments used by businesses stating that market-wide economic changes to property values, such as from Covid-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out Covid-19 related MCC appeals.

Instead the government will provide a £1.5bn pot across the country that will be distributed according to which sectors have suffered most economically, rather than on the basis of falls in property values, ensuring the support is provided to businesses in England in the fastest and fairest way possible.

The £1.5bn fund will be allocated to local authorities based on the stock of properties in the area whose sectors have been affected by Covid-19. ‘Local authorities will use their knowledge of local businesses and the local economy to make awards,’ the Treasury statement stated.

Around 170,000 businesses have made claims for MCCs. Initial claims were confined to a discrete cohort of properties and handled by the Valuation Office Agency, but claims multiplied as the pandemic and public health measures evolved. Covid restrictions have affected all or nearly all commercial properties in England – well beyond the scope of any previous application of the MCC provision.

John Webber, head of business rates at Colliers, said: ‘The government’s Valuation Office Agency (VOA) spent the last part of last year negotiating with the agents of rate payers on the impact of Covid-19 and its effects on businesses, following the government’s  working from home and social distancing policies and agreed these constituted a MCC “Material Change of Circumstance” by which businesses would be able to claim a rebate on their rates bills.

‘To now deny this is an MCC retrospectively, because the numbers are too high is deeply shocking.

‘£1.5 billion will not even scratch the surface for businesses struggling to pay their rates bills from last year - over 400,000 of which have started the appeals process in what is “the largest MCC caused by a single event in rating history”.’

‘It’s unprecedented and deeply concerning not only for our clients, but all struggling businesses across the UK.’

On business rates, the government gave 100% relief to all eligible retail, hospitality and leisure properties last year. This was worth over £10bn for 2020-21 and, alongside other business rate reliefs, meant that over one million properties paid no business rates last year. A three-month business rate relief extension and a nine-month taper worth £6bn was announced in the Budget earlier this month.

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