Commercial property tax in the UK: business rates and rating appeals

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Purpose The purpose of this paper is to investigate the impact of the introduction of the business rates retention scheme (BRRS) in England which transferred financial liability for backdated appeals to LAs. Under the original scheme, business rates revenue, mandatory relief and liability for successful appeals is spilt 50/50 between central government and local government which both share the rewards of growth and bear the risk of losses. Design/methodology/approach The research adopts a microanalysis approach into researching local government finance, conducting a case study of Leeds, to investigate the impact of appeals liability and reveal disparities in impact, through detailed examination of multiple perspectives in one of the largest cities in the UK. Findings The case study reveals that Leeds, despite having a buoyant commercial economy driven by retail and service sector growth, has been detrimentally impacted by BRRS as backdated appeals have outweighed uplift in business rates income. Fundamentally BRRS is not a “one size fits all” model – it results in winners and losers – which will be exacerbated if local authorities get to keep 100 per cent of their business rates from 2020. Research limitations/implications LAs’ income is more volatile as a consequence of both the rates retention and appeals liability aspects of BRRS and will become more so with the move to 100 per cent retention and liability. Practical implications Such volatility impairs the ability of local authorities to invest in growth at the same time as providing front line services over the medium term – precisely the opposite of what BRRS was intended to do. It also incentivises the construction of new floorspace, which generates risks overbuilding and exacerbating over-supply. Originality/value The research reveals the significant impact of appeals liability on LAs’ business rates revenues which will be compounded with the move to a fiscally neutral business rates system and 100 per cent business rates retention by 2020.

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... The academic and policy inquiry has focused on England (Amin-Smith and Greenhalgh et al., 2016;Muldoon-Smith and Greenhalgh, 2015), as local retention was adopted in 2013, thus initiating research related to the effects on local government finance. The approach in England, part of the far-reaching local financing agenda, started in 2012-13, with a 50% NDR retention scheme alongside tariffs or top-ups for councils' budgets, and has developed since, with several 100% retention pilots already in operation . ...
... The retention in effect breaks the link between business rates and the RSG. However, evidence shows that the English scheme has exposed the council budgets to additional variability on both the upside and the downside, leading to winners and losers (Greenhalgh et al., 2016;Muldoon-Smith and Greenhalgh, 2015). Moreover, since 2011, in practical terms, the councils in Scotland retain the whole amount of business rates income they generate. ...
... Primarily, it is the first in-depth investigation of the business rates system in Wales, which currently presents crucial differences with England and Scotland. Further, most studies in retention of business rates in the UK have sought to evaluate the impact of policy changes that have been already adopted (Amin-Smith and Greenhalgh et al., 2016;Mor and Sandford, 2017;Muldoon-Smith and Greenhalgh, 2015). This paper adds to this literature by studying the potential impacts of a future retention of NDR by the Welsh councils, responding to calls of the National Audit Office (2017) for an ex ante evaluation of the NDR system changes' implications. ...
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The shape of local government finance in the United Kingdom is changing. The UK Government has been promoting fiscal devolution in the context of austerity following the 2007 global economic crisis. Consequently, local government finance is becoming an increasingly important issue. According to the current regulation, the revenues from business rates, a local tax on non-domestic properties, are pooled to the Welsh Government and then redistributed to the councils, based on their adult population. In the context of fiscal devolution, and following England and Scotland, which adopted retention of business rates income, the discussion for the local retention of business rates revenues in Wales is topical. This paper looks at the organisation of the current business rates system in Wales and the impacts of a potential local retention. It provides a rigorous review of the current state of business rates scheme and the features of the councils according to the net difference between business rates, settlements and contributions. The findings suggest that the current system financially backs the economically disadvantaged Welsh councils, whereas a local retention of business rates income would possibly polarise the uneven allocation of local funding.
... various levels of non-domestic properties across space, spatially differentiated rateable values, and geographically varied reliefs (Greenhalgh et al., 2016). This implies that any localisation of a centrally managed local tax could entail a divergence of councils' funding. ...
... Muldoon-Smith and Greenhalgh, 2015;Greenhalgh et al., 2016). The BRRS has the potential to benefit the budget of the councils with vibrant property markets and negatively affect theincome of the LAs with less developed rental structures (Muldoon-Smith and Greenhalgh, 2015). ...
Technical Report
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This report describes existing business rates arrangements in Wales, summarises the current approaches to business rate retention in England and Scotland, and discusses existing proposals for NDR change in Wales. It then explores a conceptual city-region shared-gain business rates incentivisation model which would enable regional growth partnerships to retain a portion of the business rates they generate and incentivise them to grow their business rate tax base.
How can Government and the Treasury reconcile two often contradictory aspects of the commercial property tax model in England? On the one hand, commercial property tax is required to be responsive to economic conditions, promoting investment in property and business. On the other hand, local commercial property tax, in part, is required to fund local public services. This situation reveals a contradiction in government tax policy that has a direct impact upon local, regional and national economic activity. This Viewpoint article considers the nature of commercial property tax in England, the business rate system, the competing pressures upon the business rate system before considering the main alternative on offer in England, land value tax. Despite the undoubted economic elegance of this instrument, any move towards land value tax should be approached with caution. Any solution to the current business rates impasse should not be led by a pragmatic focus on tax collection. Nor should prevalent issues, the high street, the need for digital tax or public finance demands be considered in isolation – they should be tackled together because they are part of the same complex situation.
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Purpose Many national retailers have complained about increases in business rates tax bills since the 2017 revaluation. What impact has the 2017 business rates revaluation had on independent high street retailers in market towns in the north of England? The paper aims to discuss these issues. Design/methodology/approach The study uses Valuation Office Agency rating list data to determine rateable value and business rates payable for independent high street retailers in eight northern market towns either side of the 2017 rating revaluation. The data were analysed using business rates matrices to reveal the impact of the new rating list on independent retailers in the eight locations. Findings Analysis reveals that the majority of independent retailers in the northern market towns sampled have experienced reductions in both the rateable value of their premises and business rates payable. Increase in the rates relief threshold has extended relief to almost half of the independent retailers in the study, most of whom receive 100 per cent relief. Practical implications Charity shops receive at least 80 per cent rates relief which means they are able to afford to pay higher rents. This “sets the tone” for landlords setting market rents in that location which are then used as comparable evidence by the VOA when determining rateable values at revaluation further polarising the gap between rate payers and those to are exempt. Originality/value Focussing on independent retailers on high streets in markets towns in north of England, this study provides an alternative perspective to the orthodox view of business rates revaluations having a negative impact on retailers.
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This chapter examines how the Northern Powerhouse agenda will be financed, in part, through the Government’s Business Rate Scheme (BRRS). It begins with a brief summary of local government finance in England, describing the transference from a centralised model to one based on the parallel rubrics of localism and local economic growth. The central findings are structured around three interrelated themes: liability and growth potential, demand divergence, and the nature of local commercial property markets. It concludes that the BRRS has begun to roll out the conditions that will provoke parts of the Northern Powerhouse to enter an era of civic financialisation and entrepreneurial activity. However, asymmetries between commercial property markets, economic conditions and welfare need could result in a defined set of winners and losers—those that can take part in autonomous civic financialisation and those that remain reliant on a system of redistribution and equalisation.
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In an era of continuing Local Government austerity and enhanced urban financialisation, Local Government in England is increasingly reliant upon decentralised methods of urban finance (typically based on ‘new economic growth’ extracted from non-residential property development) to fund public services, economic development and urban regeneration. Opportunities for greater territorial governance and economic development often frame fiscal decentralisation, yet, critical appraisals of this agenda are less common. Reflecting upon this issue, this paper critically appraises the underlying method of ‘localist’ finance in England, the Business Rate Retention Scheme. In doing so, it describes a picture of geographical variegation in England, one that suggests that the Business Rate Retention Scheme could lead to splintered urban development, based on the necessity (and underlying viability) for new development. The paper concludes that a minority of ‘premium locations’, characterised by buoyant property market characteristics, could outperform more numerous ‘stranded’ and ‘redundant locations’. The result is that those areas most in need of investment, that exhibit some kind of market failure and geographical disadvantage, could be less able to generate new development in order to fund the Business Rate Retention Scheme. Under these conditions, rather than correcting incidences of spatial inequality, fiscal decentralisation could further polarise uneven development.
Conference Paper
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This paper describes a composite method that can be used to investigates the relationship between spatial preference (in relation to commercial real estate occupation) and spatial configuration. The key finding in this paper (based on research in the city of Leeds in the UK) is that there is a potential link between urban configuration and spatial preference that could be exploited. Traditionally, the pursuit of urban land economics has been supply driven, reliant on the rational assumptions of neo classical economic analysis. Consumer behaviour is typically an implicit assumption rather than explicit variable in traditional economic analysis. This is because it has been difficult to reveal the characteristics of economic demand (the subjective behaviour of real life participants in the urban land transaction process) and its interaction with the urban environment. In conclusion, the method demonstrated in this paper reveals how the human interaction with space (its behavioural characteristics and transactional dialogue), can be explicitly analysed, visualised and combined in order to improve the urban development process.
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This paper addresses some strategies for conducting elite interviews. It draws upon material from a significant number of interviews that the author has conducted with this group in a variety of economic sectors and countries, as well as from the social sciences literature on elites. The aim of the paper is to provide insights into the particularities of interviewing elites for those new to researching this group. In particular, it focuses on gaining trust and gauging the tone of the interview, how to present oneself during the interview, asking open and closed questions, the appropriate length of an interview, whether to record the conversation, coping with difficult scenarios, asking awkward questions, managing respondents who do not answer the question, keeping respondents interested in the interview and finally gaining feedback from respondents.
Conference Paper
Martin R., Pike A., Tyler P. and Gardiner B. Spatially rebalancing the UK economy: towards a new policy model?, Regional Studies. The current UK government has announced its intention to rebalance the national economy spatially, to create a ‘northern powerhouse’ to rival that in London and the South East. This imbalance is in fact a longstanding problem that 90 years of regional policy has not resolved. This paper argues that the entrenched nature of the UK's spatial imbalance derives in part from the centralized nature of the national political economy, and that only a bold and radical change in that political economy – based on a devolution and decentralization of or economic, financial and political power – is called for.
In spite of the fact that chain referral sampling has been widely used in qualitative sociological research, especially in the study of deviant behavior, the problems and techniques involved in its use have not been adequately explained. The procedures of chain referral sampling are not self-evident or obvious. This article attempts to rectify this methodological neglect. The article provides a description and analysis of some of the problems that were encountered and resolved in the course of using the method in a relatively large exploratory study of ex-opiate addicts.
""Doing Research in the Real World introduces readers to all the essential aspects of the research process and will be an essential guide to any student on a research methods course. David Gray's clear and accessible introduction starts by setting out best approaches to the design of appropriate research tools, and leads the reader into issues of data collection, analysis and writing up. Practically focused throughout, this book encourages the reader to develop an awareness of the real nature of research and the many means by which data can be collected, validated and interpreted. Gray's book will help students with the full research process and covers: How to select appropriate projects and research questions How to decide on the most effective research design strategies How to select and use appropriate data and literature sources How to choose and implement methods of data collection How to analyse and present data in a coherent and effective manner. This new edition provides five new chapters on: Research ethics Searching, reviewing and using the literature Research design using qualitative methods Mixed methods research designs Planning presentations and passing vivas. In addition, a wide variety of case studies, activities and new practical 'Top Tips' for the discerning researcher have been incorporated. The new edition also includes an extensive companion website which includes links to journal articles, tutorial questions and data sets. Written in a lively and accessible way, Doing Research in the Real World can be used as a set text on an introductory methods course and can be used as an essential resource for students and researchers completing research projects across the social sciences, education and business studies
In real estate the maxim for picking a piece of property is “location, location, location.” In elite interviewing, as in social science generally, the maxim for the best way to design and conduct a study is “purpose, purpose, purpose.” It's elementary that the primary question one must ask before designing a study is, “What do I want to learn?” Appropriate methods flow from the answer. Interviewing is often important if one needs to know what a set of people think, or how they interpret an event or series of events, or what they have done or are planning to do. (Interviews are not always necessary. Written records, for example, may be more than adequate.) In a case study, respondents are selected on the basis of what they might know to help the investigator fill in pieces of a puzzle or confirm the proper alignment of pieces already in place. If one aims to make inferences about a larger population, then one must draw a systematic sample. For some kinds of information, highly structured interviews using mainly or exclusively close-ended questions may be an excellent way to proceed. If one needs to probe for information and to give respondents maximum flexibility in structuring their responses, then open-ended questions are the way to go.
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