Backdated business rates - paying in instalments

On 9 March 2009 regulations will come into force allowing for backdated business rates to be paid in instalments where a rating list is altered with retrospective effect.

A business occupier's rates liability arises by reference to the rateable value of the property as provided on the rating list. A billing authority (i.e. a local authority) collects rates. However, the Valuation Office Agency (VOA) is responsible for compiling and maintaining the rating list.

The current list came into force on 1 April 2005. A rating list serves for five years although changes to a list generally have effect from the date on which the circumstances requiring an alteration occurred. This means that, when such a change is made, it could give rise to a demand being issued for a rates liability in respect of a financial year (year ending 31 March) that has ended.

Generally, a ratepayer can already pay its annual rates liability by instalments. However, where the rates liability arises as a result of a backdated amendment to the rating list and a demand notice is issued after the end of the financial year then payment cannot currently be made by instalments.

These new regulations will mean that, where a ratepayer is subject to a backdated rates liability, the billing authority and the ratepayer can agree to reschedule the liability that accrued in the period between the effective date of the amendment to the rating list and the date the amendment was actually made, so that it is payable over a period of up to eight years.

The ability to reschedule payments applies where the backdated demand notice was issued in the financial year beginning 1 April 2007, 1 April 2008 or 1 April 2009 and relates to a change to the rating list made on or before 31 March 2010.

While the benefit of these regulations will be limited, it is no doubt welcome news for the cash-flow of those businesses which are able to take advantage of it.