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Writtten Statement - Write off of Back Dated Business Rates for Split and Merged Business Property
There has recently been some interest in the backdated rating liability for businesses located in ports.
The Valuation Office Agency (VOA) value properties for the purposes of charging business rates and assigning rateable values every 5 years based on the rental values of business properties.
In 2007 - 2008 the VOA undertook a revaluation of the rating lists for ports in England and Wales which resulted in a change to the basis upon which ports were valued and listed for non-domestic rating, so as to make the valuation practice for ports consistent with that established for other businesses. Consequently, instead of ports being valued and listed as one property, with the port owner being liable to pay the rates, the individual business premises located in the ports were listed and valued individually, and the occupier of each property became liable to pay the rates. This is similar to the approach used for businesses occupying airports or shopping centres for example.
The affected businesses in Wales were issued with rates bills backdated to 1 April 2005 totalling around £4 million, and in 2008 the Assembly Government (and, in England, the UK Government) passed legislation to allow the payment of the back-dated component of the revised rates liability to be made by instalments over 8 years.
Fewer than 90 businesses located in ports in Wales were affected by this rating review, and around 50 of these have paid their backdated liability in full. The remainder are either paying their bills by schedules of instalments agreed with local authorities, or have yet to make payments.
Earlier this year, the UK Government froze the repayments being made in the financial year 2010-2011, for backdated liability in respect of relevant properties in England at an estimated cost of around £50 million. The Assembly Government had the choice of replicating this course of action, and any subsequent English action, the cost of which would have been met from the UK Government central rating pool, or accepting a consequential increase to its budget of around £2.9 million in line with the Barnett formula. At that time the Assembly Government determined that the most cost effective use of this money would be to accept the consequential and to use it to partially offset the effects of the reductions in public expenditure imposed by the UK Government, thereby helping to protect jobs and essential public services.
The UK Government has now introduced primary legislation via the Localism Bill, which will give it power to make regulations cancelling the backdated business rates liability for all split properties in England (business premises split in to more than one property and valued separately) appearing on the 2005 rating list, which have backdated rates bills of at least 33 months, and where the change to the list was made before 1 April 2010. Ratepayers with similar backdated liabilities, but whose entry on the valuation list is changed after 1 April 2010 will not have their backdated rates bills cancelled. Also, ratepayers who today have their valuation amended and backdated to 2005, would still have to pay their backdated rates, as would any ratepayer whose property is split and incurs a backdated liability after 2008.
The estimated cost of the suspension and writing off of the back dated liability in England is around £175 million. The subsequent consequential for Wales is around £10 million and the Treasury has already included this sum for consequential funding within the spending review.
The Assembly Government did not request that the Welsh Ministers be given the regulation making power within the Localism Bill to cancel the backdated liability, as if they were to use this power, it would be necessary to forego the additional funding received in the spending review, and the cuts to expenditure would therefore be even greater than those announced in the spending review. Given the financial pressures and the unwillingness to date of the UK Government to implement a fair basis for allocating funding to the Assembly Government as recommended by the Holtham Commission, the Assembly Government has to make difficult decisions on how best to maximise the limited resources available for the benefit of the people of Wales.