Treasury accused of £3bn business rates ‘tax grab’ over appeal estimates hike

The Treasury has been accused of a £3bn stealth “tax grab” in the new business rates revaluation by substantially increasing estimates for successful appeals. 

During each revaluation the Government predicts how many firms will appeal their new business rates, to ensure the Treasury is not left out of pocket.  

In recent years officials predicted around 4 per cent of the total amount collected which would eventually be paid back after successful appeals. 

However this year the estimate has increased to 6 per cent - far higher than recent years - with little explanation for the change. 

The number is significant because the Government bills businesses preemptively for the amount they expect to pay back overall. 

If they over-estimate the amount of businesses who will win appeals to reduce their bills then the money is kept by the Government. 

Experts last night said the increase was unjustified and suggested it is actually becoming harder for firms to appeal their rates. 

They claim the change will net the Treasury an estimated £600m more every year, totaling £3bn over the next five years.

Jerry Schurder, head of business rates at Gerald Eve, said: “Business rates are an extremely complex and opaque tax and there is inadequate transparency for ratepayers.

“The substantial tax burden is particularly damaging to business’ trust in the Government, and firms will want assurances that the calculations are fair and there is no tax grab.

“Business rates are onerous enough without the Government hoovering up an extra £600 million a year through hidden calculations and small print that firms would never even notice.

“Regretfully, the Government appears willing to exploit the nation’s ratepayers in this way.”

Business rates – a tax that companies pay based on the rentable value of their properties – changed for the first time in seven years this month. 

Some 510,000 businesses saw an increase in their rates, 420,000 are paying the same and 920,000 had a decrease according to Government estimates. 

Government sets a formula for how rates are calculated, which is then applied to businesses based on the value their property could be rented for. Businesseshave the ability to challenge the rate they are given. 

Estimates for what proportion of business rates revenue will be handed back through appeals has jumped from 4.1 per cent to 6 per cent, analysis by Gerald Eve found. 

When approached for a comment, a Government spokesman did not challenge the figures on estimated appeals but criticised the way it was framed. 

A Government spokesman said: “This is yet another misleading claim from Gerald Eve. The business rates revaluation is revenue neutral and helps make sure bills are fair and accurate.

“We’re required by law to set aside funding for businesses who successfully challenge their bills, which ensures that councils do not face a funding shortfall.”

It comes amid frustration that a £300 million relief package to help those worst affected by business rates rises of up to 50 per cent has yet to be implemented. 

The announcement was made in the Budget after a backlash from Tory backbenchers and small businesses about how they would cope with the changes. 

A consultation on the scheme was only completed this week and critics claim it could be months before the fund is up and running. 

It is also unclear who will benefit because councils have the power to decide for themselves how to distribute the funds.

Government sources defended the plans by saying they were only announced weeks ago and that the fund will be up and running “as soon as possible”.