Autumn Statement - Business rates 3rd December 2014

Chancellor George Osborne in today's Autumn Statement said he was launching a “full review of business rates” alongside a number of other measures aimed at aiding business and the high street.

Osborne said the government would also double small business rate relief for another year from April 2015 and would cap the inflation linked increase in business rates at 2% again next year. Osborne also said the the £1,000 discount on rates for retail businesses on was to be lifted to £1,500 from April 2015. With regards to the business rates administration review it said the interim findings will be published in December 2014, setting out a summary of stakeholder responses and providing an update on how the government proposes to respond to businesses’ calls for clearer billing, better sharing of information and a more efficient appeals system.

The government will extend the transitional arrangements for properties with a rateable value of £50,000 and below facing significant bill increases due to the ending of Transitional Rate Relief from 1 April 2015 to 31 March 2017. The government will change the rules so that alterations to rateable values can only be backdated to the period between 1 April 2010 and 1 April 2015 for Valuation Office Agency (VOA) alterations made before 1 April 2016 and ratepayers’ appeals made before 1 April 2015. In terms of the long-term review the government will conduct a review of the future structure of business rates to report by Budget 2016.

The review will be fiscally neutral and consistent with the government’s agreed financing of local authorities. The government will publish terms of reference in due course. The Autumn Statement also confirmed that agreement has been reached with the Welsh Government on full devolution of non-domestic (business) rates policy. A fully devolved regime will be operational by April 2015.

The British Property Federation (BPF) commended the ‘structural review’ of business rates which the trade body said continues "to be a burden on large and small business across the UK". The BPF urged that any future changes to the system should not take place purely to help high street retailers to compete with internet outlets, and advised reform should benefit all rate payers, not just a subset of them.

Liz Peace, outgoing chief executive of the BPF, said: “For the sake of business competiveness and government efficiency the business rates system needs to change. We need a system that is more responsive, both to changes in the economy and to the relative position different businesses find themselves in. “Basing a property tax on nine-year-old valuations is simply unfair and inefficient, and other countries have shown that with the use of technology you can design a far more responsive system. The compounding effect of annual RPI increases is also meaning that a higher proportion of taxation each year is coming from business rates, sucking the blood from our high streets and eroding many other businesses’ competitive edge. "Undertaking a root and branch review of the system is a big decision which many politicians have shied away from, and it makes today's announcement particularly welcome. We hope it is no-holds-barred and will deliver something fit for the 21st century, and one that benefits all sectors of the economy. We look forward to making a positive contribution on that basis.”

Mark Henderson, head of statutory valuations and rating at DTZ, said: “In real terms the Business Rates announcements are very disappointing, particularly for the retail lobby who were hoping that the playing field would be levelled between internet retailers and those on the High Street, which it hasn’t. “Although the Chancellor confirmed the structural review of the Business Rates system, this will not happen until the next parliament and in the meantime Business Rates will be going up next year.

“The Review, when it happens, must look at the frequency with which rateable values are revalued and consider moving to an annual basis. Businesses are being penalised by the fact the last revaluation date was back in April 2008, prior to Lehman Brothers’ collapse. “Of course, if the government had stuck to its original five-yearly cycle then at least businesses would be paying rates based on 2013 rental values. Instead, they remain artificially stuck with inflated rateable values.”