Additional recommendations for government
RECOMMENDATIONS

TRANSITIONAL RELIEF ADJUSTMENTS
To continue with no downwards transitional relief scheme
One of the very best decisions by government for the 2023 revaluation was to abolish the downwards transitional adjustment scheme, which was historically used as a subsidy to phase in liabilities for those facing the largest increases. The downwards scheme was punitive and for those struggling sectors, who needed to experience immediate falls in liability, it was essential it was abolished. This is never truer of the retail sector, which has undergone structural changes, largely through the growth of on-line retail. Although for the 2026 revaluation, we predict the general performance trends across retail appear to be bottoming out, any recovery is extremely fragile and in many secondary and tertiary locations still in decline. In line with our prediction of a 12% reduction in the UBR, liabilities across the sector should again fall. It is therefore paramount with the shortening of revaluations to three years, that the government continues with the policy that those who face liability reductions because of a revaluation receive that benefit from day one.
Maintain upwards transitional relief
With such a large forecast increase in the 2026 RV, although in part offset by a fall in the UBR, there are several sectors that will experience significant increases in liability. It will not be rare in sectors such as hotels, some leisure and commercial airports, for valuations to more than double. Since the inception of the UBR and the 1990 revaluation we have had an upwards transitional scheme and it was a bold but necessary move by the last government to continue with the scheme but through abolishing downwards transitional relief, self-fund the scheme through other government revenues. This will cost an estimated £2.75bn over the three years of 2023 list.
We recommend that the government continues to fund the upwards transitional scheme - but not directly from the business rates system. Our only concern is that with values post Covid-19 rising far more significantly for the 2026 revaluation, many more businesses would fall into the scheme.
Although it's difficult to be precise at this stage, it is quite possible that in adopting the same scheme the costs of the transitional scheme could be at least twice the level of the 2023 revaluation. This would mean it costing close to £6bn over three years, with almost 70% of the hit being in year one.
If the government keeps the tax revenue neutral, so again commits £2.75bn, it has a funding black hole of at least £3bn.
Again, options for government are limited, but we expect they will have to look at the reliefs system as the most sensible option, given the sharp rise in reliefs awarded since 2019.
INVESTMENT IN COMMERCIAL STOCK
One of the major issues with the tax is that it is always construed as being a disincentive to invest as improving a building will very often increase a rateable value. This cannot be good for the UK economy especially given the drive to decarbonise commercial building stock.
We have recently been working with the CBI as they submit their recommendations as to how business rates can be improved.
We completely support two of their proposed measures:
1. Improvement relief was introduced from April 2024 offering occupiers a one-year rates holiday where an improvement has been made which increases a rateable value. We want to see that extended to incorporate landlords, who often improve buildings to benefit an incoming tenant. We consider this will help speed up the reoccupation of space. If possible, we would also like to see government increase the period of the relief to two years, so it has a more profound impact on the level of improvement CAPEX.
2. We do consider that empty rates remains a barrier to investment and is an outdated concept. Business rates should only ever be taxed on occupation. There is no strong evidence that landlords/developers have ever intentionally kept buildings empty. Research commissioned by the British Property Federation demonstrates that it “typically takes at least 12-18 months for the majority of retail units to find a new occupier” (vacancy-period-data-summary-of-ldc-analysis.pdf (bpf.org.uk). There are so many drivers they have no control over including: the state of the market, the time it takes to refurbish stock and for larger redevelopment schemes the complete disconnect with the extremely slow planning system, which significantly extends the period between vacant possession and the development starting.

We would therefore welcome a detailed review of empty rates for government to consider:
1. Is it necessary to penalise landlords through empty rates or is the main driver purely to increase government revenues. Does it disincentivise landlords/developers who should be directing the funds to invest and encourage earlier reoccupation of the stock.
2. Is it appropriate that landlords/developers employ mitigation techniques to reduce empty rates exposure. The current punitive empty rates system is promoting bad behaviours.
3. How could changes to empty rates better align with improvement relief to encourage investment, maximise business rates through re-occupation, improve building stock to reduce carbon emission targets and ensure we have a business rates system which is more closely aligned with the improvements the government is seeking to introduce across the planning system.