"Philip Hammond has yet again failed to grasp the nettle that is stinging businesses large and small up and down the country and missed a trick in today’s Budget to introduce some serious much needed reform to the business rates system." says John Webber, Head of Business Ratings at Colliers International.
The Chancellor announced today he would;
- Use the lower CPI (3%) instead of RPI (3.9%) inflation figures when calculating the rates rise next April
- Provide respite for those businesses that suffered from the Supreme Court’s decision to uphold the so called “staircase tax” and making sure any that suffered would be able to claim payments back
- pubs with an assessment of under £100,000 will continue to receive £1,000 per annum of rates relief until March 2019
- Move to shorter revaluation period- every three years.
Webber comments, “Business rates are now at an eye watering tax rate of 50% for every £1 of rental value bringing in £25 billion per annum and rising. So, whilst we are pleased the Chancellor has listened to our longstanding call to peg business rate rises to CPI, which at 3% is lower than the RPI 3.9%, it’s a shame the Government has taken so long to do this. Also, while a 3.9% rise would have resulted in a £1bn 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.”
Turning to the staircase tax, Webber comment, “The staircase tax reversal will be interesting as in our opinion it should never happened in the first place. A return to pre Mazars is a common-sense approach- but 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. While it may have been an unforeseen windfall at the time, it will undoubtedly have already been spent and it will be interesting to see how they finance the refund!"
The extension of the discount rate for pubs is, according to Webber “small beer” and will make 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 got through.
However, on the positive side, Webber does welcome the move to three yearly valuations, something Colliers have been calling for some time. “ At least they’ve now admitted that the seven year revaluation period was an absolute howler for the distress it gave to businesses, many of whom saw their business rates shoot up suddenly (based on property rises in the period.). Three years will be much better for businesses forecasting their finances.” he said.
Overall Webber was disappointed, not in what the Chancellor said, but in what he did not say in the Budget, “All this is still tinkering round the edges. We still have a business rate system in massive need of reform, a retail sector that has been 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 CCA 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 and higher taxes and layers and layers of bureaucracy.”