Covid-19 is not MCC for business rate appeals – Government

Government says Covid-19 is not Material Change of Circumstance when it comes to business rate appeals:
Written statements – Written questions, answers and statements – UK Parliament


COVID-19 has presented a significant challenge for businesses in all sectors. The Government’s response to the pandemic has been unprecedented in scale, with more than £280 billion provided to protect millions of jobs and businesses, and the Budget in March setting out an additional £65 billion support in 2020-21 and 2021-22.

On business rates specifically, at Budget 2020 the Government announced a 100% business rates relief to all eligible retail, hospitality and leisure properties, given the acute and direct impact of COVID-19 restrictions (Non-Pharmaceutical Interventions) on these sectors. This was worth around £10 billion in 2020-21 and, alongside other business rate reliefs, ensured that over 1 million properties paid no business rates this year. At Budget 2021, the Government announced that it would extend the scheme for the first 3 months of 2021-22 at 100%, followed by a 9-month period of relief at 66%, subject to a cash cap for businesses. Taken together, this amounts to business rates relief worth £16 billion for retail, hospitality and leisure properties.

While support has been needed to support these sectors, our business rates system is designed to provide a stable source of income for local councils and help fund vital local services – such as street lighting and keeping streets safe and clean. It is based on the principle of regular revaluations, with changes in property values reflected at these revaluations. Market wide economic changes affecting property values, such as from COVID-19, can only be properly considered at these general revaluations, which is why we have changed the date of the next revaluation to 1 April 2023 (based on rental values at 1 April 2021) to ensure it can better reflect the impact of the pandemic.

Between these revaluations rateable values should only change for Material Change of Circumstances, which is a process intended to consider individual cases like roadworks near a property that affect its value. A number of businesses that do not qualify for our existing reliefs have sought to challenge their business rates liability by seeking reductions to their property’s value through this Material Change of Circumstances provision.

Relying on this system to help businesses that need further support from the pandemic is not the right mechanism. These appeals would seek to reduce rate bills, and funding for local councils, based on the estimated impact of COVID-19 on the market value of a property, and not on the economic circumstances of the business. This system was not designed to address the challenges we face and would mean significant amounts of taxpayer support going to businesses based in offices – like banks, large online retailers and technology businesses, law firms and consultancy firms – many of whom have been able to operate successfully throughout the pandemic.

The process of resolving these appeals and litigation through the courts could take years and would not provide the support now when it is most needed. It would also expose local authorities to uncertainty about their financial position – including whether they would need to return money spent on their response to COVID-19, and how much.

Without action and legislation, there would also be a significant impact on the entire business rates system, as the Valuation Office Agency faced working through these cases, further valuation tribunals, wider separate cases, and preparing for the next revaluation in 2023. This would be at the detriment of other ratepayers who would suffer as a result of the valuation system grinding to a halt.

Nevertheless the Government recognises that businesses outside of the retail, hospitality, and leisure sectors have also been adversely affected by the pandemic, including through limitations on how their property can be used. So we are now going even further than the £16 billion of relief since Budget 2020 – and providing £1.5 billion of additional support to businesses that have not already received business rates relief. This is the fastest and fairest way to support businesses outside the retail, hospitality and leisure sectors who have been adversely affected by the pandemic.

The new relief will ensure a fairer and more proportioned allocation of support, by awarding funding through local authorities, who will able to use their knowledge of their local businesses and the local economy to award dedicated support to those businesses who need it most. Funding will be allocated to councils taking into account the economic impact COVID-19 has had on specific sectors. This approach will ensure relief is awarded quicker than would be the case if businesses sought support under the sometimes drawn out process of a rating appeal, which can often last years.

At the same time we will legislate to ensure that the Government’s response to COVID-19, including restrictions on the use of property, is reflected at the next revaluation in 2023, in line with the principle of the Business Rates system, and not through complicated and protracted property-by-property litigation. We will do this through:

  • Introducing primary legislation with retrospective effect, when parliamentary time allows, to clarify that COVID-19 and the Government’s response to it is not an appropriate use of Material Change of Circumstance provisions; and
  • Laying a Statutory Instrument today with the same effect prospectively and bringing it into force on the same day.

Taken together, this will ensure support for COVID-19 continues to be directed to ratepayers through rate reliefs – including the additional £1.5 billion of support – in the fairest and fastest way, and not through valuation appeals made by rating agents. We will work with and support local government to enable ratepayers to apply as soon as possible this year, once the legislation relating to Material Change of Circumstance provisions has passed and local authorities have set up local relief schemes.

This will give local councils the certainty they have been seeking, and will ensure that support flows to businesses in need across England, rather than primarily to high value locations and the office market.