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Digital business overview
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Digital business rates to offer consolidated view

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Digital business rates will be a powerful data platform that will give ratepayers an overview of their total business rates liabilities, but what else could it be used for?

17th Aug 2022
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Someone in HMRC thinks that MTD is such a brilliant idea that it should be extended to business rates, and has come up with a snappy three-letter acronym for the proposed digital business rates database: DBR.

The government committed to digitise the business rates system in its final report of the business rates review published on 27 October 2021. HMRC is now consulting on how the DBR should receive data, how to match that data with tax data held by HMRC, and how to give ratepayers and their agents access to view the data for a particular ratepayer.

As business rates are a devolved responsibility, the DBR will only operate for properties in England, with a possibility of it being extended to Wales, but not to Scotland. The DBR is expected to be operational from 2026/27, and certainly not earlier.

What problem does it solve?

Local authorities (known as billing authorities: BA) are responsible for issuing business rates bills, collecting business rates and granting rate reliefs. During the Covid-19 pandemic, support was provided to many businesses through business rates holidays and local authority grants paid to certain categories of ratepayers. However, the government believes this support could have been better targeted.

There are 309 BAs in England, who each have separate billing systems, although there is some limited cooperation and data sharing across some BAs. A large business operating out of many premises may receive business rates demands from several different BA across the country, often in paper form.

Small businesses that operate out of small premises, may qualify for small business rate relief but only if the business uses one or two very small properties. At present there is no mechanism for checking that a business is not claiming small business rate relief incorrectly on several properties located in different areas.

There are also a number of other targeted business rate reliefs which largely rely on the ratepayer to self-certify that they are eligible to claim, as the BA can’t cross-check information with HMRC.  

What will DBR do?

The DBR platform will sit between the VOA and the BA systems (see diagram), but will be “owned” and operated by HMRC.

digital business rates flow chart

The main aim of the DBR is to join up business rates data, which is currently held by both the valuation office (VOA) and the 309 BA in England, with tax data held by HMRC on those ratepayers. This will allow the BA to check if businesses are eligible for the reliefs they claim.

HMRC will also be able to compare business turnover and profits to the total amount of business rates the business pays, and so target any further business rates reliefs to those ratepayers who really need it. This targeting could allow reliefs to be directed away from certain very large businesses (such as supermarkets) and from property owners who are not trading commercially (such as furnished holiday lets). 

The DBR will also allow ratepayers to view all of their business rates bills from around the country in one place. The consultation says this data will be displayed “alongside other tax information in a standardised way”, which implies the rates data will be included in the business tax account (BTA), but that is not confirmed. The consultation mentions integrating the DBR into the single customer account (see para 2.12).

Three data options 

To tie up the tax data to the correct ratepayer and the commercial properties they occupy, the business will need to provide some form of identification that can be verified. This could be a combination of:

  • UTR number
  • company registration number 
  • registered charity number 
  • VAT number    
  • NI number 
  • PAYE reference.

HMRC has proposed three different routes to collect the necessary ID data.

Option A: From 2023 all business ratepayers (including those with 100% relief) will be required to notify the valuation office (VOA) of any changes to the property, the occupier, trade, rent and lease. This will be an annual online return required to facilitate a three-yearly revaluation cycle, instead of the current five-year cycle. The ratepayer could be obliged to provide their tax ID numbers to VOA as part of this new duty to notify.

Option B: The ratepayer could be required to provide tax ID numbers to each BA which they deal with.

Option C: The business would logon to HMRC through their government gateway and submit the reference numbers for each commercial property they occupy.   

HMRC favours option A.

What the DBR won’t do (yet)

The DBR will not centralise payment of business rates, it will only present a consolidated view of business rates information. HMRC will not take any legal responsibilities to issue business rates demand notices or collect payment of bills.

HMRC doesn’t currently know exactly where businesses actually operate from – this is one of the additional data points it wants to collect in the proposed big data grab.

Once the DBR is functional it will be a small step for HMRC to check whether a business is operating from a premise subject to business rates or not. HMRC may wish to inform the local authority that an occupier of a residential address is a trading business, although HMRC will need to be given express permission to share this personal data which otherwise would be regulated under GDPR.

System of penalties

There would have to be a system of penalties to encourage businesses to provide accurate data needed for the DBR at the required time. The easiest solution appears to be to tie in the DBR data requirement to the VOA requirement to notify (option A), and then the penalties for both data obligations could be unified.

The consultation says there would be a soft launch for any penalty regime. 

How to respond

You can respond to this consultation before 11.45pm on 30 September 2022, through an online survey or by email to: [email protected]. HMRC is also organising online engagement events to discuss the DBR consultation. The next one is on 25 August (2pm to 3pm). To attend this online session email: [email protected].

 

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Replies (6)

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LL
By RickyRoark
17th Aug 2022 16:23

Sounds like another penalty farming scheme as HMRC try to grab more data from the taxpayer.

Business Rates should be abolished.

Thanks (1)
Replying to RickyRoark:
avatar
By Paul Crowley
17th Aug 2022 17:55

Agree penalty farming
Yet more penalties that need zero human intervention. AI is not human and has no concept of reasonable behaviour

Thanks (1)
By ireallyshouldknowthisbut
17th Aug 2022 17:24

sheesh, so a dual system which no-one will be able to police (due to lack of resources) which its only real function is to police issues which they wont find as the fraudsters wont engage with it in the first place.

Layers and layers of over centralised red tape on business seems to be added annually for little purpose.

It looks like another IT solution looking for a problem.

The sensible route (if its really needed) would be to look at centralising rates billing on one single system, but as that is generally profitably outsourced (profitable for the outsourcers) to the likes of Crapita I guess their fees would be lower so they are not going ot lobby for that. Much better to have all those local systems plus a big central system. Trebles all round.

Excluding holiday lettings from rate relief would be very simple within the existing framework, just make them liable for ordinary council tax.

Thanks (2)
ghm
By TaxTeddy
18th Aug 2022 12:24

I can't believe they are considering linking it to the creaking old PAYE system. That system can't even report PAYE receipts and liabilities correctly.

Thanks (2)
paddle steamer
By DJKL
22nd Aug 2022 14:20

Jointly owned property could be interesting re the UTR field, few have a partnership UTR. (Not that it impacts up here)

Thanks (0)
Head of woman
By Rebecca Cave
25th Aug 2022 08:53

The ICAEW has written about this and included a questionnaire on the options in the consultation paper:
https://www.icaew.com/insights/tax-news/2022/Aug-2022/The-future-of-busi...?

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