Will the Non-Domestic Rating bill actually help business rates?

New legislation expected to be introduced in 2024 aims to create a fairer system that will be ‘more responsive’ to market changes.

Currently going through Parliament, the Non-Domestic Rating Bill, which follows the 2020 business rates review consultation, aims to incentivise greener property improvements and encourage regular property evaluations to ensure rates are more in line with the current market.

In essence, the measures set out in the Non-Domestic Rating Bill involve:

• Increased revaluations from every five years to every three.
• Administration reforms to encourage shorter revaluation cycles, creating more accurate rating lists and disclosure of information to ratepayers.
• Digitalising Business Rates project which will generate better data for central and local Government to help improve business rates compliance.
• Measures to help support decarbonisation and greener property investments, including a 12-month exemption of higher rates bill for qualifying improvements.
• Three-year Government-funded ‘Transitional Relief’ scheme to help businesses transition to changes to rate bills.

So what sort of impact is this bill likely to have on UK businesses?

Measures outlined in the Bill are positive and a step in the right direction

Bev Flanagan MAAT, Director, Bev Flanagan Financial

The Non-Domestic Ratings Bill will introduce more frequent valuations. This means that, with falling valuations, bills will be lowered sooner. It will also provide new business rates improvement relief, meaning that businesses that make qualifying building improvements will not pay higher business rates for 12 months. This will create a positive cash flow impact on businesses taking advantage of this tax break that wish to extend or upgrade their property.

I believe this will be an effective measure for many businesses that have struggled post-pandemic, and owners who want to build their businesses back up. For the valuations to be looked at in a quicker timescale than it currently is and to adapt the rates bills according to underlying market conditions would be a big benefit.

The more frequent valuations and the extension of tax reliefs are steps in the right direction for all. Businesses, livelihoods and jobs need to be protected after the recent period of sustained crisis.

Verdict: Exempting qualifying businesses from higher rates for 12 months will create a positive cash flow for businesses. 

The Bill incentivises businesses to invest in eco-friendly property improvements

Francis Fabrizi AATQB, Keirstone Limited

The Non-Domestic Rating Bill aims to modernise the business rates system by improving the sustainability and environmental impact of commercial properties. It seeks to incentivise businesses to invest in eco-friendly improvements by linking business rates to the property’s energy efficiency rating. This means that businesses with more sustainable properties will pay lower business rates, while those with less energy-efficient properties will pay higher rates.

Accountants should be aware of the new business rate system and the impact it will have on their clients’ commercial property’s energy efficiency as well as business financials. They will also need to work with clients to ensure they’re meeting the new energy efficiency standards, analyse clients’ property’s energy performance and recommend eco-friendly improvements that can increase their energy efficiency rating (eg energy-efficient lighting, insulation, renewable energy and other sustainable property upgrades).

Accountants should also advise their clients on the potential financial benefits of improving the energy efficiency of their commercial properties.

By investing in energy-efficient improvements, businesses can:

• Lower their business rates.
• Reduce their energy bills.
• Potentially attract more customers who are environmentally conscious.

The bill’s effectiveness will depend on how successful it is in incentivising business owners to invest in sustainable and environmental property improvements.

Primary beneficiaries of the Non-Domestic Rating Bill will be businesses that invest in sustainable and eco-friendly property improvements. However, businesses with less sustainable properties may face higher rates, which could impact profitability. There may also be a potential disadvantage for businesses operating in areas with low environmental standards or limited access to sustainable resources.

Verdict: The bill incentivises businesses to invest in eco-friendly property improvements. Accountants have a key role to play in helping clients understand the Bill’s implications and benefits.

Annie Makoff is a freelance journalist and editor.