Property Tax and Assessment New From Around the World- For Information Purposes Only

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UNITED KINGDOM What s Inside - November 2015 Check, challenge, appeal system to streamline business rates process LGA: self-assessed business rates will put council finances on firmer footing Top

status Retail Leaders meet with Treasury CHECK, CHALLENGE, APPEAL SYSTEM TO STREAMLINE BUSINESS RATES PROCESS Proposals put forward by local government minister Marcus Jones aim to streamline the

1 UNITED KINGDOM What s Inside - November 2015 Check, challenge, appeal system to streamline business rates process LGA: self-assessed business rates will put council finances on firmer footing Top stores warn of job losses unless business rates are overhauled National living wage and business rates are 'lethal cocktail', says Tesco CEO Northern Ireland charity shops may have to lose rates-free status Retail Leaders meet with Treasury CHECK, CHALLENGE, APPEAL SYSTEM TO STREAMLINE BUSINESS RATES PROCESS Proposals put forward by local government minister Marcus Jones aim to streamline the process by which businesses check and challenge their rates bills. Jones said the check, challenge, appeal process would end a decades-long deadlock caused by excessive amounts of speculative appeals that led to unnecessary deals and some unscrupulous agents. About 70% of the 850,000 appeals submitted against rating valuations for the 2010 rating list result in no change to the rateable value, and less than 2% proceed to a tribunal hearing. The vast majority of these are submitted by agents, many of whom work on a no win, no fee basis. The local government minister said: The business rates appeals process has been in a decades-long deadlock, hampered by some unscrupulous agents making speculative appeals sometimes for businesses unaware this is being done on their behalf. A key part of our long-term economic plan is to turn this around and streamline the system, which is why we re proposing a straightforward three-stage process so people can check and challenge their valuations and be confident they ll get a fair deal. The government s proposed three-stage process would include: * Check: ensuring the relevant facts are up to date and accurate, with any agreed errors quickly corrected * Challenge: allowing the business to challenge the rateable value on which their business rates bill is based, giving them the opportunity to set out their grounds for challenging, an alternative valuation and to put forward supporting evidence Whitehall expects the greater majority of cases to be resolved by this point * Appeal: offering the opportunity to appeal to an independent valuation tribunal The Valuation Office Agency would also develop a simple online service that allows customers to provide information and track the progress of their check or challenge. Page 1 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

2 A new fee would be charged for anyone seeking to lodge an appeal in order to ensure as many cases as possible are settled beforehand. The fees, of around 100 to 300, would be refundable to anyone whose appeals are successful. The deadline to respond to the government s consultation is 4 January of next year. If reforms are given the green light by Parliament, they will be implemented using extended powers in the Enterprise Bill. The move builds on the chancellor s plans to devolve business rates to local areas announced earlier this month. By the end of this government, local government will retain all of their local taxes, including the 26bn of revenue from business rates. Whitehall will also scrap the Uniform Business Rate and give councils the power to cut business rates. While this is expected to boost local economic activity, credit agency Moody s recently argued that devolving rates will drive up council debt as a result of increased borrowing to invest in business development. It added only councils with a strong potential to stimulate local businesses would benefit and strengthen their credit, while regions that fail to harness business growth will dependent on uncertain returns. LGA: SELF-ASSESSED BUSINESS RATES WILL PUT COUNCIL FINANCES ON FIRMER FOOTING Businesses should be able to self assess the value of their properties as part of further reforms to the business rate system, according to the Local Government Association. This would provide councils with greater financial certainty once the tax is devolved. A move to self-assessment is needed to protect councils from the cost of appeals against business rate valuations following full retention of growth from 2020, an LGA report said. Under current rules, councils will have to meet the cost of successful appeals refunds once localisation of business rates is complete. The LGA warned this would undermine financial planning in local government, with town halls responsible for appeals against values set by the independent Valuation Office Agency based on estimated annual rent. Almost 900,000 businesses have challenged their business rates bill since 2010 and around 330,000 appeals still need to be decided before the next national revaluation takes place in Councils currently meet half the costs of refunds and have been forced to divert 1.75bn to cover this risk since Self-assessment would make the system similar to other self-assessment taxes such as VAT and corporation tax, the LGA said. Under the LGA s plan, businesses would submit their own assessment of rateable value ahead of Businesses would only then be given a three-month window to appeal the final VOA valuation, compared to the current system when there is no time limit between revaluation periods. Following this, a multiplier would be set based on the property values that would maintain the same levels of revenue, similar to the current system. Page 2 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

3 Claire Kober, chair of the LGA s resources board, said the level of appeals against valuations proved that no one was happy with the way business rates are being calculated. By 2020, local government will retain all of its business rates income which will be provide a vital boost to high streets and investment in infrastructure and public services. However, it will also mean councils will be liable for 100% refunds. This makes reform of the appeals system even more urgent to protect councils from the growing and costly risk of appeals and ensure businesses are happy with what they pay, she said. Councils will face 10bn in cost pressures by the end of the decade, even before the possibility of any further funding reductions in the Spending Review. Every penny will count to give councils the best chance of protecting services over the next few years. Our selfassessment business rates proposals would free them to use the money put aside to cover the risk of appeals to fund vital services and help plug growing funding gaps. TOP STORES WARN OF JOB LOSSES UNLESS BUSINESS RATES ARE OVERHAULED SOME of Britain's biggest retailers have warned stores could be forced to shed jobs in Scotland unless business rates are overhauled. Boots, Marks & Spencer and John Lewis are among 40 firms and business organisations that have called for a fundamental reform of non-domestic rates. They say business rates, which raise 2.8billion, place an "unsustainable burden" on them. In an open letter to The Herald, they describe rates as "a tax on jobs and growth" that "acts as a drag on the Scottish economy". They urge all of Scotland's political parties to commit to a review of the system in their manifestos for next year's Holyrood election. John Swinney, the Finance Secretary, defended Scotland's business tax regime as "already the most competitive in the UK". The call for reform has been co-ordinated by the Scottish Retail Consortium, which represents big store groups and supermarkets, backed by a number of other organisations from the manufacturing, engineering, accountancy, tourism and leisure, publishing and commercial property sectors. Other firms supporting the move range from Harvey Nichols, the upmarket department store, to high street bakers Greggs. The list, available in full on The Herald's website, heraldscotland.com, also includes Lloyds Pharmacy, Paper Tiger, Schuh, Sterling Furniture and Watt Brothers. David Lonsdale, director of the SRC, said: "This is a powerful statement from a broad and formidable cross section of business and industry in Scotland that the business rates system is out of date, no longer fit for purpose and in serious need of fundamental reform. Page 3 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

4 "The current system is a tax on jobs and growth, undermining investment in property. "There is no greater pressing issue for a wide range of business sectors and industries in Scotland than the prohibitive burden of business rates." Warning of job losses, he added: "This is not just a problem for firms. "Business failures have a profound and damaging impact on communities through job losses, inward investment and a loss in government revenue through the forfeit of other taxes. "In the retail industry alone, there have been over 3500 jobs lost over the past year with the risk of losing more unless this tax on jobs and investment is reformed to support business growth and employment." More than 250,000 Scots work in the retail sector, close to one in eight of the workforce. Business rates are based on the rateable value of a company's premises, multiplied by a "poundage" which is set annually by the Scottish Government. Larger businesses occupying property with a rateable value above 35,000 pay a supplement, which subsidises a rates relief scheme affecting almost 100,000 smaller premises. The poundage this year is 48p in the 1 with a 1.3p supplement for larger businesses. For much of the previous decade, the Scottish poundage rate was significantly higher than south of the Border but was brought into line with the English level by Mr Swinney in In addition, the Finance Secretary last month handed councils powers to reduce business rates in their areas, a move welcomed by business organisations. Revenues raised by business rates are retained by councils and help pay for local services. But the Scottish Retail Consortium argued the system does not "flex" to reflect changing economic circumstances and takes no account of a firm's profitability. As a result, it says, tax take from business rates has soared by 42 per cent since 2007, despite the past eight years being among the toughest the retail sector has faced in decades. By contrast, revenue from council tax, the equivalent domestic property tax, has risen by just seven per over the same period after it was frozen by ministers. A Scottish Government-backed commission is currently looking at alternatives to the council tax, with a view to presenting political parties with a range of options ahead of next year's election. Mr Swinney said the business rates system was under "active review" and called for "constructive proposals" from companies. He added: "Scotland s business tax environment is already the most competitive in the UK. "This has reduced business rates for many since 2007, with around two thirds of retail premises in Scotland benefitting from rates relief." Page 4 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

5 NATIONAL LIVING WAGE AND BUSINESS RATES ARE 'LETHAL COCKTAIL', SAYS TESCO CEO The chief executive of Tesco, Dave Lewis, has said retailers face a potentially lethal cocktail as profits slump but costs rise because of business rates and the national living wage. Lewis said jobs were on the line in an industry that employs three million people, with the possibility that shops could close and prices on the high street could increase to pay for the extra costs. In a clear message to George Osborne to take action to support the industry, Lewis said retailers faced 14bn of extra costs in the next five years from an increase in business rates and the introduction by the chancellor of the national living wage in This is at a time when profitability in the industry is at its lowest level ever due to changes in shopping habits, price deflation and the rise of online shopping. In supermarkets, profitability has sunk from [margins of] 5% to 2% in five years and now we face significant new cost pressure. This is a potentially lethal cocktail, Lewis told the CBI annual conference. He said the business rates system was unsustainable and disproportionate, and an urgent review of the tax was needed. Retailers will pay 8bn in business rates this year, a quarter of the UK total. It is by far the biggest tax the industry pays: for every 1 a large retailer pays in corporation tax, the company pays 2.31 in business rates. Tesco s business rates bill has risen by 35% in the last five years at a time when profits have fallen significantly. Lewis said: Over the last five years property values have fallen, profits are down but business rates are up. Quietly but dramatically. Business rates have hit 8bn for retail. That s over a quarter of the bill and significantly more than any other sector. That s an enormous pressure. Shops have closed. Businesses lost. Jobs sacrificed. Lewis urged the government to consult with leading retailers about tax and regulation changes, warning that the national living wage could have unintended consequences when it comes into force. Businesses will be required to pay at least 7.20 per hour to workers over the age of 25, rising to 9 by He said: Our concern, and the concern of many colleagues, is that there is pressure to increase base pay at the expense of benefits. We don t think this is the answer. We shouldn t simply strip down employment to an hourly rate or draw arbitrary lines. It s more complex than that. Benefits are hugely important to our colleagues, valuable too. Our workforce is not homogeneous. Our colleagues say they value different things at different stages in their lives and at Tesco this is what we are trying to accommodate. We need a fuller debate aimed at doing the right thing for the people in our industry without imposing more cost, without providing individual benefit or business return. At Tesco we re working on a menu of benefits which gives colleagues flexibility of choice and support which they value including a competitive pension scheme, a 5% turnaround bonus, colleague discount, plus the opportunity to invest in the business through save as you earn. As an industry there is a worry that the unintended consequences of the living wage have not been fully thought through. Lewis also claimed that a reduction in the salt content of Tesco s own-brand products had saved 1,500 lives. Page 5 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

6 On Monday shares in the company fell again on the back of analyst downgrades. Tesco shares fell 2.48p, or 1.4%, to p after Clive Black, an analyst at Shore Capital, said so much more needs to be done for Tesco UK to be a destination of choice for shoppers. NORTHERN IRELAND CHARITY SHOPS MAY HAVE TO LOSE RATES-FREE STATUS Northern Ireland businesses and the 11 recently restructured local authorities have an opportunity to push for changes to reform the way in which non-domestic properties are levied for business rates. They have until January 25, 2016 to respond. This consultation is not about a reduction or increase in the money to be raised. Stormont is considering what rule changes might be introduced if they were to raise at least the same revenue from rates as at present: 592m in There are several important possible changes and other important distinctions that could affect the policies and budgeting of each of the local authorities as well as changing the impact on some businesses. Northern Ireland already has an extensive list of categories of ratepayer that are partially or wholly exempt from business rates. Also, with the reform of local government, there are aspects of business rates where wider discretionary decisions might be passed to each local authority in the discharge of their newly defined remit. This review of business rates is taking place in the shadow of a major change in the way businesses are affected by corporation tax. The reduction in corporation tax will affect Government revenue so that, if appropriate, there could be some set-off from tighter business rates. Ten different concessions and exemptions reduce income from business rates by 221m each year. Each of them merits reconsideration. The biggest concession, costing 87m each year, is the exemption from rates liability for charities. This needs to be reconsidered both in terms of the definition of an eligible charity and also in terms of some of the commercial relationships of charities with normal businesses. There is a strong case that charities which are trading commercially on the high street have an undue advantage compared to other rate-paying traders. In England, the exemption from rates for charities is constrained to only 80% of liability for rates. Northern Ireland might make some changes. Charities might be wholly or partially levied for rates on premises used to engage in high street commercial activity and shops. The 80% exemption might be applied to the non-commercial uses of property but with a change to give discretion to the local council on the final 20%. This would be part of a shift of several initiatives to the local authorities. In addition, because vacant retail premises attract partial 50% rates charges while charity shops are rate-free, the retail market is distorted with an incentive to shop owners to lend/lease vacant shops to charities to avoid paying rates. Charities which trade commercially might be levied for 50% of the commercial rates. The second largest special rates reduction is the 70% concession on rates bills for qualifying manufacturing businesses. This costs 58m each year. Since these manufacturing businesses, like other commercial businesses, will benefit from the large reduction in corporation tax, there is a case to offset some of the cost of the tax concession by changing this concession which, in today's terms would be in breach of the State Aid rules. Page 6 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

7 The attractive sounding Small Businesses Rate Relief scheme must come under the microscope. It costs 18m every year but is not thought to generate any significant economic leverage on small business behaviour and is due to end in Perhaps it should lapse. The responsibilities of the 11 new local councils bring a new dimension to their planning, spending and revenue raising. The reform of business rates, with discretionary local decision making, gives potential supplementary leverage to incentives for local economic development. An ability to offer local discretion on regeneration schemes and in the attraction of investment is a new feature of the agenda for councils. Councils should be emphasising their ambition to have flexibility and discretion on rates, as part of their development planning. Councils and business organisations have good reason now to be active participants in this consultation. RETAIL LEADERS MEET WITH TREASURY The leaders of two of Britain s biggest retailers have held talks with the government to demand for urgent reforms to the burdensome business rates regime ahead of the chancellor s Autumn Statement. Sir Charlie Mayfield, the chairman of John Lewis Partnership, Sainsbury s chief executive Mike Coupe, and Helen Dickinson, the director general of the British Retail Consortium (BRC) met with Treasury minister David Gauke last week to discuss the government s ongoing review of rates. George Osborne launched the review in March and is expected to report back on the initial findings at the Autumn Statement on 25 November. However retailers fear that there will be no substantial overhaul because of government ambitions to keep the review fiscally neutral, which in other words means that the amount that rates generate for Treasury coffers will stay the same. A source close to the talks said that with the government unlikely to change its stance on fiscal neutrality, the meeting focused instead on urging for the rates burden to be shared out more fairly throughout the economy with other business. Businesses have long called for a reform of rates, which they argued is outdated, limiting investment and damaging Britain s already struggling high streets. Speaking at the CBI conference on Monday, Tesco boss Dave Lewis called for "urgent reform" and warned that the government s failure to act on rates could lead to widespread job losses. He said: Over last five years property values have fallen, profits are down but business rates are up. Quietly but dramatically. The sector is the largest contributor to the levy, forking out 7.8bn last year. The BRC has warned that an increase in rates and recent policy changes including the National Living Wage rise will add an extra 14bn onto the bill over the next five years. Page 7 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

8 Dickinson, said: The minister listened carefully to our case for business rates reform. We look forward to the chancellor s autumn Statement and the continuation of the conversation with the government about how retail can help deliver the living wage in the context of a reformed business taxation system. Page 8 *The items included in have been extracted from published information; IPTI accepts no responsibility for the accuracy of the

Property Tax and Assessment New From Around the World- For Information Purposes Only

Property Tax and Assessment New From Around the World- For Information Purposes Only UNITED KINGDOM What s Inside - November 2015 Check, challenge, appeal system to streamline business rates process LGA: self-assessed business rates will put council finances on firmer footing Top stores