During the last Autumn Statement, former Chancellor, George Osborne, pledged to commit to a full review of the business rates regime. Although he may not be Chancellor any more, some of his promises were finally honoured last week when the Valuation Office Agency (VOA) released details about the new system. Whilst SMEs and accountants may have held different views on what changes needed to be made, they both agree that not only are the changes are long overdue; they also believe the impact of the changes to business rates will be significant.
Mr Osborne had called for an extension of double relief for small firms and a continuing cap on inflation-linked increases. He claimed that by doubling this small business rate relief 500,000 firms would benefit, and that 300,000 would pay no rates whatsoever. He also called for inflation-linked increases to be capped at two per cent: he argued that with such a cap in place high-street shops, public houses and cafes would see a £1,000 discount on rates increased to £1,500 in subsequent years.
So what changes has the VOA announced? Well, they may fall short of what the former Chancellor called for, but they are, never the less, radical. The changes, which are set to come into law in April 2017, do include an increase in rates relief to £12,000.
Addressing the changes, the VOA report states:
“The 2017 rating revaluation will produce the largest changes in rateable value for a generation – businesses may be sleepwalking into the effects without planning for the consequences, both good and bad.”
However, whilst the changes have been broadly welcomed by the wider business community, the revaluation of rentable values and the subsequent changes to business rates will be felt differently right across the country.
If you own a business operating in London and the South East, the type of rate increases that you can expect will be significantly higher than businesses operating elsewhere. SMEs operating in the e Midlands and the North of the country will fare significantly better, with more likely to see their business rates remain the same of even be reduced.
Why is there such a disparity between the South East and the rest of the country? Well, the last time the VOA collected this type of data was way back in 2008, and since that time much has changed. This latest revaluation is measured on rateable values from 2015 and unsurprisingly rents in the capital have risen sharply in that seven-year period. But it isn’t just London-based businesses that will see hefty increases: businesses in Brighton, Winchester and Oxford are also likely to see their business rates increase significantly.
There has been widespread criticism of the changes, particularly from businesses in the South East of the country, but the Government has defended them, insisting that it is cutting business rates and that the system needed updating. It also states three-quarters of businesses will experience no change to their existing rateable values and that 600,000 firms across the country will see their rates cut entirely.
Marcus Jones, minister for local government, defended the ‘fair and impartial’ changes and said that the Government was committed to supporting businesses through these changes by setting aside a £3.4bn transitional relied fund which it hoped would help SMEs adjust to the new regime.