With budgets under pressure and business rates reform still a distant prospect, Chris Grose of Hartnell Taylor Cook sets out the practical steps public sector bodies can take to review their liabilities and ensure they are not paying a penny more than they owe.

Business rates continue to hit the news, facing allegations that they are excessive, do not reflect modern property trends and values, and plenty more. Successive Governments have promised to reform or abolish them, but in most cases have ended up just tinkering around the edges.

The basic conundrum that the Government has is that business rates bring in around £25 to £27bn a year. The collection rate is excellent with around 97% of the due amount being collected at a very low cost of collection.

There are few volunteers putting their hands up to say they wish to pay more tax to replace a forgone business rate income and there remains plenty of criticism directed toward any replacement.

Demands of business ratepayers or their representatives have been for more frequent revaluations, a lower rate in the pound, and a balancing between retail and non-retail properties as well as high street retail and online retail. Many of these have been met with the lowest rate in the pound for retail leisure and hospitality properties – below the rate in 1990.

The changes to the multipliers that came in in April will have benefited precepting authorities that were ineligible for the retail, hospitality and leisure relief as they will qualify for the lower multipliers on eligible properties.

In Scotland, public sector occupiers are discouraged from appealing their rating assessments – if they do, they are at risk of losing an equivalent amount of grant to the rate saving, but the same rule does not apply in England. Public sector occupiers are therefore fully entitled to review their rate liabilities in England, although precepting authorities lose some of the saving to rate retention.

In this time of challenged budgets, the public sector needs to ensure that every penny they spend is investigated, and this applies to business rates as well as other expenditure. The avenues of reducing rates liability for the public sector is similar to the private sector:

• Checking that rates are only being paid on properties they are liable for.

• Ensuring that any reliefs they might be eligible for, particularly empty relief, are applied for.

• Checking the rateable value is correct and appealing where necessary.

• Considering mitigation for empty properties. Mitigation is controversial for public sector bodies but a number do it, and indeed one of the leading cases involves a public sector body. It is important, though, that public sector bodies ensure schemes are legally sound.

Checking rate demands

Bodies need to ensure their property terriers are up to date and then check rate demands up to them. Ensuring they know what building or part of the building the demand is for is crucial. They also need to check whether the property is occupied and by whom.

Reliefs

There are a few questions necessary to ask here. If the property is occupied by a charity but the authority has agreed to pay the rates, should the demand be put in the charity’s name to benefit from charity relief? Are there other properties to which the occupier may benefit from relief? In some cases, small business rate relief may apply or in even more limited cases rural rate relief. It is not only important to ensure the authority are paying the correct relief but also the tenants. After all, tenants with reduced outgoings can, in theory at least, afford to pay more rent.

Rateable values

The rateable value for the 2026 Rating List is meant to represent the annual rental value as of 1 April 2024. Has the VO been aware of all the rents? Has the VO made an accurate assessment? Has the property been split at some point in the past and the VO not made aware of the split? Historically, it has been relatively easy to appeal one’s own rateable value. However, the complexities of the current system mean that it is no longer as easy. Most rating agents work on the basis of the savings that they generate, making the exercise a non-cost one.

Empty property

This is a difficult one. Clearly, where a property is vacant then the vacant relief should be obtained. If the property is undergoing works, then consideration should be given to seeking to delete it from the list. However, if the property is empty and looks as if it will be vacant for a long time, is there an opportunity here for the public authority to mitigate rates and recover some capital? The courts have determined in several cases that they are not courts of morals. Some councils have been known to go out to tender to seek rate mitigation suppliers, one government agency having successfully been to court to argue that their property was vacant, resulting in the judge issuing guidance on when a property was occupied to assist in mitigation cases. Authorities, rather than using an established scheme, could just look to find ways of making the legislative rules work for them.

Authorities owe it to their council tax and business rate payers to ensure they are spending their money wisely and are taking steps to ensure they are minimizing their liability for business rates.

Chris Grose is Rating Director at Hartnell Taylor Cook.