Small business rates reaction

16 March 2016

Increasing the small business rates multiplier to capture properties with a rateable value of up to £50,000 is a good headline grabber, but will only save business between £160 at the bottom of the scale and £600 per year at the top.

However, the decision to permanently increase small business rates relief will be a welcome boost to many small businesses. This relief has been temporarily doubled for many years but has become a significant tax cut that many small businesses have come to rely upon. It was just a matter of time before this increase became a permanent fixture, but we will need to see how this increase ties in with EU State Aid restrictions.

The move to change the calculation of business rates by limiting annual increases from RPI inflation to CPI inflation from 2020 is also very welcome, but many businesses will ask why wait until then? With a full property revaluation taking effect from April 2017 and the tax rate being re-set, next year would have been the perfect opportunity to make this change. This decision probably coincides with the announcement that rates revaluations will happen more frequently and so will likely take effect from the next revaluation.

Local Government will be particularly interested in the detail of these changes. With 100% of business rates being retained by Local Government by 2020, the risk associated with lower business rates receipts could fall on their shoulders and service delivery may be affected.

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