By John Webber, head of business rating at Colliers International
On the surface, Budget 2017 looked like the Chancellor was finally addressing some key issues facing businesses concerning their business rates hardships.
At last the welcome decision to bring forward by two years the linking of next year’s rate rises to the lower CPI (3%) instead of RPI (3.9%) inflation figures.
And we have also finally been successful in our call for more frequent revaluations, now three yearly. This will be much better for businesses planning ahead and hopefully put in the past, the howlers caused by the seven-year Revaluation in 2017.
Pubs with an assessment of under £100,000 will continue to receive £1,000 per annum of rates relief until March 2019 and the dreaded ‘Staircase Tax’ decision will be reversed.
The Supreme Court ruled that buildings with multiple occupiers should be assessed on a floor-by-floor basis, removing any allowances for multiple floor occupation. The Chancellor has announced that this be reversed.
Only scratch the surface
But not everything today was good for business. These measures only really scratch the surface of the issues they are facing. Business rates are now at an eye watering tax rate of 50% for every £1 of rental value, bringing in over £25 billion a year per and rising.
So, whilst a 3.9% rise would have resulted in a £1billion extra tax take next April, a 3.0% rise is hardly a tax holiday. It will still mean a £0.75 billion rise for hard-pressed businesses in their business rates bill.
“Business rates utopia, it certainly isn’t!”
And although a return to pre-Mazars is a common-sense approach, unfortunately many businesses will now have to go through a no doubt expensive appeal process. The finance officers in billing authorities up and down the country may now be scratching their heads as how to implement this.
Places like Tower Hamlets were major beneficiaries of the tax and they will have to refund the monies paid back to 2010. Such funds undoubtedly will have already been spent - so how will they finance the refunds?
And the extension of the discount rate for pubs is really “small beer” making little difference to a sector hammered by the rates system, where many are going under due to increased costs and many rebates have not yet gone through.
To me what stands out from the Budget is not what the Chancellor said, but what he did not say. He’s still tinkering round the edges. We still have a business rate system in massive need of reform, a retail sector hit for six by the rate rises following the seven-year revaluation, receiving little relief and an appeal system, commonly acknowledged by rate payers as not being fit for purpose.
Many businesses find the new Check Challenge Appeal system unworkable and impossible to negotiate. Hammond has totally failed to acknowledge this and yet again businesses are left stranded in a world of higher taxes and layers of bureaucracy. Business rates utopia, it certainly isn’t!