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Budget 2016: Business rates reform too slow, say critics

Industry organisations welcome some changes to business rates announced during chancellor George Osborne’s 2016 Budget but there are calls for more fundamental reforms. Drapers rounds up the initial reaction.

George Osborne Budget 2016

George Osborne Budget 2016

Business rates will be scrapped for properties with a rateable value of £15,000 or less from next April, Osborne announced, while the wider tax will be linked to the Consumer Price Index from 2020

Jerry Schurder, head of business rates at property consultancy Gerald Eve:

“The move to CPI [the Consumer Price Index, from the Retail Prices Index] will be welcomed by hard-pressed firms – but they will ask, why not implement it immediately? By waiting until 2020 to make the change, and sticking with the discredited RPI measure, the chancellor is unfairly squeezing UK plcs for an extra £5.2bn.

“While welcome, this change will do little to allay ratepayers’ anger with the business rates system. They seek a cut in their excessive rates bills, already the highest local property tax worldwide, not just a moderation of the speed of increase.

“Since 1990, successive governments have pocketed an extra £35bn in business rates payments as a result of using RPI rather than CPI. It’s great that the chancellor has acknowledged this injustice, but supremely cynical that he’s not doing anything about it for another four years.”

Gerry Biddle, business rates consultant at financial services firm Deloitte:

“The government has responded to the loud calls for change from small businesses and major retailers, and the chancellor has accepted the need to link business rates to CPI, but not until 2020. Such a change could eventually lead to a significant loss of annual revenue increasing each year, which may in fact benefit large businesses over smaller businesses as they pay a larger proportion of tax.

“By raising the lower threshold for exemption from business rates from £6,000 rateable value to £15,000, around 600,000 properties (out of a total of 1.8 million) will no longer be subject to paying business rates, an increase from the current exemption that applies to 385,000 properties.

“The top 3.4% of properties in England – around 61,000 – currently make up 53% of the total rateable value of non-domestic properties. By contrast, 70% of properties in the rating lists have rateable values below £15,000 and these constitute only 11.8% of the total rateable value. It is clear that the chancellor’s largesse for small businesses can be achieved at a relatively low cost to the Exchequer.”

Melanie Leech, chief executive of the British Property Federation:

“CPI … is a much better indicator of commercial property rental growth than the now-discredited RPI. This move, coupled with an improved appeals regime, should go some way to making business rate fairer.

“There is more that government could have done, though, to really reform of the business rates system and we are disappointed not to see the review suggest more frequent revaluations and greater rates relief for empty properties.”

Edward Cooke, director of policy and public affairs at British Council of Shopping Centres:

“While a move to CPI indexation is an improvement, it does not address flaws in the system. And further, you have to ask why business needs to wait four years for this change.

“The announcement to move towards more frequent revaluations is, however, to be welcomed – and on this aspect it is pleasing to see the chancellor has listened to the advice of businesses.

“However, there is still a critical element missing and that is ensuring more transparency in the calculation of the tax. Without change in this area more appeals are inevitable and more frequent revaluations will be impossible.”

Jace Tyrrell, chief executive of New West End Company:

“Retailers in London’s West End are still facing business rate rises of up to 80% from next April as a result of a revaluation, and we had no clarity today from the chancellor as to what help, if any, he will be giving businesses in the capital to meet these costs.

“We still face the double whammy of the national living wage and the apprenticeship levy and, as parliament voted to block modernisation of our Sunday trading laws, we cannot look to that to make up the difference. Taken together all three negative changes will add £165m of costs on to the retail businesses of the West End next year.

“That is why we want the chancellor to use the consultation he announced today on business rates revaluations to spell out plans for a robust transitional relief scheme that will limit the rises that will hit London’s retail flagships.

“The West End brings in millions of visitors every year to the UK and it is important that the chancellor does not forget the contribution that bigger retailers make. Only helping small- and medium-sized businesses risks the slow strangulation of the golden goose.”

Keith Cooney, national head of business rates at property consultancy Knight Frank:

“The increase in business rates relief is a welcome gesture in support of small businesses, but today’s announcement does not go nearly far enough. Business rates generate £28bn per year, and a saving of £1.5bn does not significantly ease the burden. There is a still a very real risk that our business rates system undermines the UK’s competitiveness within Europe.

“In the long term, fundamental reform is needed, as part of a wider overhaul of the UK’s tax system. In the meantime, the changes to the administration of business rates, namely the rebasing of the rates to the CPI and the proposal to look at the introduction of three year revaluations, does at least show the government recognises there is a problem.”

 

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