STICKING PLASTER ON A BROKEN RATING SYSTEM

10/03/2017

Chancellor Philip Hammond has used his Budget to reveal three business rate reforms intended to soften the blow of rate increases and appease those hit the hardest.

It is clear that business rates cannot be abolished, as some have suggested. They raise £25bn a year, all of which by 2020 will fund local government.

Current business rates are based on 2008 property values, and a new rating list will soon come into force. The 2008 valuations are outdated and disproportionately benefit London properties, which have seen values rise rapidly since then.

However, the hold-up of the revaluation for secondary shops and offices throughout the country has caused these occupiers to struggle with business rates which were set with effect from April 2008.

For some time now, the government has been looking to reform the business rates revaluation process.

It was disappointing that the Chancellor announced a consultation in ‘due course’ on a new preferred approach.

We in the industry and our clients have for a long time stated that we need properties to be revalued more frequently.

This would help to alleviate large increases, and uncertainty to occupiers and local authorities. However, reading the details of the Budget, it seems that the government will not set out its preferred approach until the autumn Budget and will consult ahead of the next revaluation in 2022.

So it looks as though we face yet another five-year rating list even though for it has been widely agreed for a considerable period that the 2017 list should only last for three years.

In announcing a £435m business rates relief package, the Chancellor claimed he was ‘listening to the voice of business’.

Although we welcome the news that Mr Hammond is taking “action to back British businesses” we believe the proposed measures proposed are just sticking plaster on a system that is widely acknowledged to be somewhat broken and outdated.

Three measures were announced as part of the relief package.

1. Small firms losing small business rate relief after the upcoming revaluation will be supported by a cap on their rates increase. No Small business taken out of the relief scheme will see their rates payable rise by more than £600 a year. Under the reformed system, the rate increase will be capped at £50 per month or the new transitional relief cap, whichever is highest.

This is great news for small businesses and will be welcomed by most. However, medium and large businesses will still be hit by huge liability rises, or lower decreases. With Brexit just around the corner, this was a chance for the government to encourage large business to stay in the UK rather than move to parts of Europe where occupancy costs are lower.

2. Pubs with a rateable value of £100,000 will receive a £1,000 business rates discount for one year April, subject to state aid limits for businesses with multiple properties.

Although this is good for about 90 per cent of pubs, some have seen their rates bills increasing dramatically and we believe a saving of £1,000 in the first year will not stop the rot of many pubs closing, especially in hard-hit rural areas of the North.

We are disappointed and curious as to why this relief is only for the pubs. Recent retail relief did assist many shops in local hard-hit areas so we do not see why, ignoring the obvious cost to the government, this relief cannot be granted for all retail and leisure occupiers.

3. Provide local authorities in England with funding to support £300m of discretionary relief, to allow them to provide support to  individual  hard cases in their area.

With over 300 local authorities in England, the fund equates to less than £1m per council to offer relief over the five-year period.

We understand the relief will be based on a formula used to respond flexibly to local circumstances. How this is managed over a five-year period will be a minefield.

We at Scanlans believe that, although the above measures will help a large number of business occupiers in a small way, all need to ensure their rateable values are correct as these will clearly affect current and future liabilities.

For more information please contact our Head of Rating, Colin Whelan 07881 249812 who will be more than happy to assist. colin.whelan@scanlans.com

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