The review of the small business rate relief scheme in chancellor George Osborne’s latest Budget is a very welcome one for UK businesses and is a better outcome than many expected.
The news that many more qualifying businesses will pay no rates whatsoever from 2017 is also cause for celebration for small business throughout the nation. However, the devil will be in the detail.
On closer examination of the Budget, small business rate relief will be increased to 100 per cent for businesses that qualify with a property with a rateable value below £12,000. However, for those between £12,000 and £15,000, relief will be tapered - not quite as hard hitting as Osborne’s speech implied.
The chancellor also stated that the higher rate threshold will increase from £18,000 to £51,000, and that this will have a benefit for slightly larger business properties. While this news is a positive step, in reality it will not make a great deal of difference.
Nonetheless, the claim is that from April 2017 some 600,000 small businesses will pay no business rates at all, a further quarter of a million will see their rates cut and half of all properties will see their rates either fall or be abolished altogether.
In stating this, it seems that Osborne is attempting to predict the outcome of the valuation office agency’s upcoming rating revaluation which is not due to be published until autumn 2016.
There are other qualifying requirements to these claims, and the focus may well move now to question exactly what constitutes a small business as rateable value of a property is a measure of rent paid rather than turnover.
A potential issue may arise when comparing a business which has multiple small properties with a business which has a single property. The implications could be very different for a business with one property assessed at £49,000 rateable value and another business with 10 properties each assessed at £4,900.
In a change that was requested by the British Retail Consortium (BRC), the business rate poundage will be linked to the Consumer Price Index rather than the Retail Price Index. However, the BRC may be disappointed that this will not take effect until 2020.
As ever, much of the more interesting information and impactful changes were not included in the chancellor’s speech. This includes the announcement that government will aim to move toward more frequent business rate revaluations taking place every three years.
This is something that both the Rating Surveyors’ Association and Sanderson Weatherall have long advocated as this would have curbed most of the valuation anomalies of recent times. The modernisation of business rates administration is a welcome move and I look forward to the publication of the discussion paper later this month outlining options on how the government plans to achieve this.
Other significant changes not in the speech but within in the detail of the Budget include the linking of local authority business rate systems to HMRC, which has numerous implications for collection of rates, and a new consultation in summer 2016 on 100 per cent rates retention.
Finally, one could argue that Boris Johnson’s Greater London Authority is getting favourable treatment in gaining an increase in the retention of business rate growth in their areas whilst other local authorities all remain on 50 per cent until 2020.
With so much talk of devolution and giving more power to local authorities in the North of England, the chancellor may have missed an open goal.