Business rates - Spring Budget 2017

14 March 2017

The Chancellor's announcement to introduce new business rates transitional arrangements for businesses losing Small Business Rates Relief will benefit the worst hit small and medium sized business. However, at some point over the next five years many businesses many will bear the full brunt of the large jump in their Rateable Values.

The new £1,000 discount for many pubs was a good headline-grabber, with the Chancellor estimating that up to 90% of pubs will receive the relief. However, this is likely to be an optimistic estimate because many larger pubs (over Rateable Value £100,000) are not eligible for the relief and chains pubs also being largely disqualified due to EU state aid restrictions.

One category of businesses, (those in the parts of the Country where decreases were expected) will be breathing a sigh of relief as their expected decreases have not been further curtailed by the budget announcements.

Local authorities will again play a key role in helping local business through the introduction of a new relief to help soften the impact of the rates revaluation on 1 April by allocating £300m to help worst-hit business.

The new relief creates a new administrative burden for both local authorities and ratepayers, and the Government will need to cut out red tape by making the relief process as painless as possible. A costly application process will add more frustration and confusion to the business rates system.  As with many targeted reliefs, the financial assistance will again be subject to EU state aid limits.

Whilst we don't feel the rating system is necessarily broken, it does need reform to ensure that rates bills are more responsive to the property market whilst continuing to provide local councils with stable income to ensure they can provide valuable local services. The problems of how to capture revenue from digital and on-line retailers, who also benefit from infrastructure provided by Local Authorities, also has not been addressed.

The budget announcements, whilst welcome, are just sticking plasters over these fundamental problems. The best way to make rates bills more responsive to the rental market is to have more frequent revaluations.

The Chancellor's commitment to provide more frequent revaluations will present a fundamental change to how business rates operate.  The Government tentatively set out its options for reform last year and it is likely that a self-assessment option may be introduced to allow valuations to happen more often.  It will bring business rates closer to how other taxes operate and will cut through a lot of existing red tape.

However, the reform would effectively transfer the administrative burden onto businesses, which would need to find extra resources to conduct the assessment.

For further information, speak to Phil Vernon, head of rating at PwC or visit MyTaxPartner

View Phil Vernon’s profile on LinkedIn

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