Seventeen business organisations including the Confederation of British Industry and the Federation of Small Businesses have said the Department for Communities & Local Government exceeded its powers when it proposed tightening rules on business rates appeals.
The organisations also argued that the new system could not lawfully bar appeals against the Valuation Office Agency rate assessments as it sought to do this on the basis of an undefined phrase.
Signatories said in a letter to parliament’s joint committee on statutory instruments that regulations should be put to MPs before taking effect.
Business rate revaluations are due to take effect on 1 April and the DCLG has insisted these will be fiscally neutral across England, though with winners and losers in different areas.
The letter though complained that the DCLG’s intention to bar appeals against sums that fell within a valuer’s “reasonable professional judgement” failed to define this term, which was also a concept unknown in property taxation.
It added that DCLG had exceeded its powers by trying to define matters of accuracy in valuations.
Ministers have defended the validity of the revaluations, which they said showed that nearly three-quarters businesses in many areas would get either lower or unchanged rates bills from April.
Those whose rates increased would benefit from a portion of a £3.6m transitional relief fund available over a five year phase-in period.
Communities secretary Sajid Javid said: “The revaluation of business rates will help make sure bills are accurate, with nearly three-quarters of businesses seeing a fall, or no change. In fact, the generous reliefs we are introducing mean that 600,000 small businesses are paying no rates at all – something we’re making permanent so they never pay these bills again.”
Claire Kober (Lab), chair of the Local Government Association’s resources board, said councils had had to divert £2.5bn over the past five years to cover the risk of appeals and refunds.
“By 2020, local government will retain more of its business rates income and could become liable for 100% of refunds,” she said. “Any possible rise in appeals as a result of this latest revaluation 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.”
Cllr Kober said the revaluation’s fiscal neutrality would mean that “local government will not see any increase or reduction in funding through business rates as a result of the revaluation”.