The government has made an amendment to the business rates reforms by dropping the controversial proposals around the rates’ appeals process.
The Department for Communities and Local Government’s draft proposal indicated that businesses – including retailers – that appealed their new rate valuation would be denied a rebate on their tax bill if the government’s miscalculation fell within a “reasonable margin” of error.
According to ratings specialist firm CVS, this proposal meant appeals regulations would deny businesses £2.5 billion worth of rebates over the next five years.
However, Communities Secretary Sajid Javid had a meeting with business rates specialists after Chancellor Philip Hammond’s Budget speech on Wednesday to confirm that this stipulation in the draft regulation would be amended.
The final draft of the business rates regulation no longer features the “reasonable professional judgement” provision.
READ MORE: Business Rates: the Good, the Bad & the Ugly
The amendment comes after weeks of intense pressure from leading retail and business leaders over the business rates reforms, which come into effect on April 1.
There was also a threat of legal challenge from 13 business groups, including the Confederation of British Industry (CBI) and the Federation of Small Businesses (FSB), regarding the appeals process proposal.
CVS chief executive Mark Rigby said he was “delighted” that Javid had made this amendment.
“[Javid] was once again fully committed to ensuring all firms pay fair and accurate tax, without rebates being curtailed, and he should be commended for taking on board the concerns of business,” he said.
Colliers International head of ratings John Webber said the amendment was a “victory for common sense” and said the provision would have “wiped out the majority of the appeals with the stroke of a pen”.
“It was never going to be workable,” he said
A spokesperson from the Department for Communities and Local Government said: “The change is designed to ensure common sense in the system, and to make clear that there is no arbitrary ‘margin of error’ being applied.”
During his speech on Wednesday, Hammond announced a £300 million business rates relief fund that would be distributed to local councils over four years, and an extra £110 million set aside to help small businesses coming out of business rates relief.
A review of business rates will also aim to take place every three years, rather than five.
The government has also already put in place a £3.6 billion transitional fund to help businesses facing sharp increases when the business rates are updated for the first time since 2010.