Autumn Statement: Chancellor acts on business rates – but fails to win over critics

December 5, 2013
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Chancellor George Osborne extended small business rate relief in his Autumn Statement today and capped next April's rate rise at 2%.

He also introduced a re-occupation relief for vacant town centre shops and a £1,000 rates discount for small shops, pubs and restaurants.

“We are backing British businesses all the way,” he said.

The Chancellor extended the doubling of small business rate relief to April 2015.

The additional support for the retail sector came through a business rates discount of up to £1,000 in 2014-15 and 2015-16 for retail properties (including pubs, cafes, restaurants and charity shops) with a rateable value of up to £50,000, and a 50% discount from business rates for new occupants of previously empty retail premises for 18 months.

Business West, the organisation behind the Swindon Initiative, and other business organisations had urged the Chancellor to freeze rates for two years and urgently reform the system.

The property industry and other business groups including the CBI and Federation of Small Businesses had pleaded with the Chancellor to take major action over business rates.

But his actions today will prove too little too late, according to national commercial property consultancy Lambert Smith Hampton (LSH).

LSH’s South West director of rating, Paul Stevens, said: “The Government has missed the opportunity to reform the out-dated business rates system, which would reduce the Government’s administration burden, allow them to settle appeals more efficiently and remove artificial barriers to further development and growth.

“The proposed measures will complicate an already complex regime and avoids addressing the more fundamental reform required by business occupiers.”

He said this was unlikely to make a significant difference to the viability of the business and much more radical changes to the rating system were required if they were to have any real impact on rates bills that are perceived by many to be crippling both industry and the high street.

“The Chancellor should have made the most of the fragile, but real, signs of recovery by relieving business of punitive and increasingly regressive taxes on commercial buildings,” he added.

“There are a series of small measures designed to assist business, although these are minor including a promise to clear all outstanding 2010 rating appeals by July 2015, the spreading of rate payments, the extension of small business relief and an important acknowledgement that the market needs a ‘kick start’ through a 50% new occupation relief for previously vacant commercial and industrial premises.”

And West of England-based ratings expert Ben Batchelor-Wylam, who works at agents Colliers International, dismissed the Autumn Statement rating measures as the Coalition’s attempt to grab headlines without substance in the hope British business won’t value what the cap actually means. 

“We have been lobbying to highlight the issue of compound interest and whilst we are grateful that Mr Osborne has capped the increase in business rate costs, the underlying problems remain; empty rate charges, the postponement of the 2015 revaluation (therefore rates haven’t been redistributed) and uncertainty for small business as to whether or not they’ll receive on-going rate relief for anything longer than a 12 month window,” he said.

“We’re striving for a fair, simple system, one which British and global  business can invest in and build from, not just now but in the long-run, certainly longer than any single party’s term in office.”

The British Property Federation welcomed the one-year freeze and the promise of a review. But chief executive Liz Peace added: “Simply tinkering around the edges of the system will not be enough – the business rates regime remains one of the greatest barriers to investment in the built environment, and is fundamentally unfit for the 21st century.”

And Simon Tivey of accountants PwC warned of a ‘merry go round’ of retailers moving to take advantage of the vacant shop relief and a rise in the number of charity shops on our high streets.

“The new 50% reoccupation relief for small businesses on the high street could reduce the number of vacant shops but has the potential to be unfair to existing businesses who may struggle to pay full rates,” he said.

“Unless it’s managed properly, unintended consequences are inevitable, with small businesses just moving shops to take advantage of the relief, creating a merry go round of rate relief relocations.

“Consultation will no doubt be required and local councils will look carefully at how this new relief interacts with charity shop relief of 80%, wary it will lead to a proliferation of charity shops.”

 

 

 

 

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