HMRC have published a response to their consultation 'Digitalising Business Rates: connecting business rates and tax data’.

In the Final Report of the Business Rates Review, published in Autumn Budget 2021, the government committed to modernise and digitalise the business rates system through the Digitalising Business Rates (DBR) project by:

  • Matching business rates data with central HMRC tax data.
  • Displaying business rates information alongside other tax information in a standardised way.
  • Holding this data centrally.

The key benefits of this are expected to be improved compliance, better-targeted policy and administration of reliefs, and enabling businesses to better understand and review their tax liabilities by having them all in one place. It should also make the provision of information quick, easy and convenient for ratepayers.

The aim of the Consultation was to determine how best to do this.

The consultation proposals included:

  • Keeping local authorities responsible for the billing collection, and enforcement of business rates and for deciding what reliefs businesses are entitled to.
  • Data sharing across the different systems e.g. HMRC, the Valuation Office and local authorities, but with the payment system remaining unchanged.
  • Penalties for not complying with the new DBR requirements.

In summary:

  • Regarding the scope of DBR, there were mixed feelings, with some welcoming the limited scope while others felt it could go further to provide more value for ratepayers.
  • Most respondents favoured providing a tax reference number rather than a property reference for the matching of data, and as part of the new Valuation Office Agency (VOA) duty to notify changes to a business property that might affect business rates liabilities, as it was easier to locate.
  • Some stated that although having a centralised billing functionality was a ‘nice to have’, the main benefit and value as a user would be the ability to also make bill payments through the same service, as otherwise it there would be a duplication of information they already have access to.
  • There were mixed views about penalties being used overall for DBR. Most respondents answered that if the government was going to proceed with penalties then there should be a single regime for both DBR and the VOA

The government response includes the following:

  • A new obligation on ratepayers to provide a tax reference number. Though there will be a sanctions regime for failure to comply with that obligation, issuing penalties will be a last resort.
  • Removal of the centralised billing element from the project as building such a service will not represent good value for money. The project will instead focus on delivering core data matching capabilities which will enable better targeting of reliefs and improved business rates compliance.
  • To minimise the additional burden on ratepayers, HMRC and the Valuation Office Agency (VOA) will work together on the design of an integrated GOV.UK service. This will be designed to capture the tax reference (and accompanying information where needed to validate that tax reference) through an integrated journey with the new VOA duty, so ratepayers can use a single portal for all their business rates interactions with central government.

The government is now looking to identify a suitable legislative vehicle to move the proposed changes through Parliament. In the meantime work is ongoing on the design of DBR and the government will continue to engage with key stakeholders on this.

Useful guides on this topic

Business Rates: What's new?
The government is exploring different methods for the reform of business rates. Proposals, including three-year rating valuations and have been set out in a number of different consultations.

External link

Consultation outcome: Digitalising Business Rates: connecting business rates and tax data – summary of responses  

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