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We now have the full supporting detail from Wednesday’s Autumn Statement announcements and much of this detail may neutralise or offset the benefit of the headline measures announced on Wednesday. Looking at the different business rates announcements, the details are a follows:
Multipliers
The headline announcement was a cap of 2% on the RPI increase in the business rates multiplier for 2015/16, the actual RPI increase having been 2.3% – see our news item on September RPI. This announcement will reduce next year’s small business multiplier from 48.2p to 48.0p. However, the following day, DCLG announced an increase in the small business rate relief supplement of 0.2p! The small business rate relief supplement will increase next year from 1.1p to 1.3p. This means that the large business multiplier for 2015/16 will be 49.3p.
This increase offsets the RPI cap for all properties with Rateable Value £18,000 or more (RV £25,500 or more in Greater London) which are those properties that provide the vast bulk of business rates income to the Government. A score draw for most larger ratepayers!
We await announcements from Scottish Government but the expectation is that they will follow previous policy and align their multipliers with those in England. Welsh Assembly Government is to get devolved powers on business rates – see details below – but, if they were to cap the increase in the Welsh multiplier at 2%, this would mean a figure of 48.2p.
Rates Reliefs
The present doubling of small business rate relief, which was due to expire on 31 March 2015, has been extended for a further year. This means that businesses with RV £6,000 or below are eligible for 100% rate relief. This extension was always likely as the Chancellor would not want to end a rate relief for small businesses, many of whom are voters, at a date about a month before a General Election!
The Retail Relief, a £1,000 discount for shops with Rateable Value below £50,000 will increase next year to a £1,500 discount. However this is limited by EU “State Aid” rules that will restrict its benefit to larger businesses.
Reviews
The Chancellor announced a “review of the future structure of business rates” to report by Budget 2016. However, the review is to be “fiscally neutral” which will make it unlikely to produce any significant change in the overall burden of business rates.
The review of business rates administration (see our earlier news item) will report in December 2015. But it is hard to see how an administrative review such as this can accomplish any serious change knowing that a more major structural review follows only months later.
In the meantime we will also get interim findings from the administration review, and a discussion paper on business rates avoidance, both in December 2014 – a strange selection of Christmas reading!
Transitional Arrangements
The existing scheme of Transitional Arrangements (so-called “phasing”) expires on 31 March 2015, which is consistent with the planned 2015 rating revaluation, now postponed to 2017. The Chancellor announced an extension of the existing arrangements for properties with a Rateable Value of £50,000 or below which are facing significant rates increases as a result of the ending of transition. This extension of the scheme will limit annual increases to 15% or 25% depending upon the size of the property.
Backdating
The rules on backdating of changes to Rateable Value will be changed so that alterations to rateable value can only be backdated to the period 1 April 2010 to 31 March 2015 if they result from a ratepayer appeal made before 1 April 2015 or Valuation Office Agency alterations made before 1 April 2016.
This is an unusual measure and appears to risk causing a flood of ratepayer appeals before 1 April 2015, at a time when the Valuation Office Agency is struggling to clear existing appeals and to begin work on the 2017 revaluation. Practitioners will want to look at the detailed wording of regulations giving effect to this to see exactly what elements of backdating it may apply to. For example, it would appear perverse to prevent a ratepayer from backdating an appeal to delete the assessment of a property that has burnt down!
Wales
Welsh Assembly Government is to get fully devolved powers over business rates with effect from 1 April 2015. This will be an interesting area to watch as WAG has previously shown a refreshingly independent view on some business rates issues and will now have free rein on this. Might they be able to come up with some rather more innovative approach than the English one – which seems to be to give with one hand and take back with the other!
Summary
Whilst the temporary reliefs for smaller businesses are welcome ones, they are only temporary extensions of existing schemes, and the overall effect on larger businesses is pretty much neutral. The reviews that have been announced seem unlikely to promote real and major change. For those familiar with the last major review of business rates, what has been announced now appears to be “Lyons Light”!
The truth is that the deficit in public finances means that the Chancellor will find it hard to reduce significantly the burden of business rates to ratepayers as it appears to be his one recession-proof source of income.
