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With a number of reviews of the business rates system currently under way, and with the promise of the Chancellor’s “devolution revolution” from the Conservative party conference, there was hope that the 2015 Autumn Statement might contain proposals for genuine and significant reforms to the business rates system. However the announcement itself contains little that is new and even less that will be likely to reduce the business rates burden significantly.
It is simplest to deal first with what is new and where the statement contains definite proposals. The current doubling of small business rates relief, which means that small businesses occupying with property Rateable Value below £6,000 pay no business rates at all, will continue for a further year from 1 April 2016. This is welcome news for smaller businesses, but the relief is paid for by a supplement paid on the business rates of larger businesses and the announcement may well presage an increase in that supplement to fund the additional year’s relief for smaller businesses.
There will also be 26 new or expanded Enterprise Zones established, where business rates relief will apply. But those reliefs are subject to European Union “State Aid” limits that mean that the maximum amount of such relief for any one taxpayer is effectively about £50,000 per annum. So, again, the announcement is welcome but the relief is limited in extent and does not address the fundamental problems with the current UK business rates system.
The measures that the Chancellor would point to that, he might say, would represent fundamental change are those that he announced at the Conservative party conference and which centre around an increase in business rates retention by local authorities from the current 50% up to 100% by the end of the current parliament in 2020. However that change will not, in itself, reduce the burden of business rates; as we pointed out in our news item about the Chancellor’s conference announcement. The Autumn Statement contains no significant new detail on this change. The promise that local authorities will be able to offer business rates discounts is repeated but, as we have previously pointed out, local authorities already have these powers, and have had since 2011, but they are not presently offering many such discounts as they have to fund these themselves and their budgets are already under pressure.
The “structural review” of the business rates system is still due to report back for Budget 2016 but, if this Autumn Statement announcement is any indicator, it looks unlikely that review will address properly the fundamental problems of the business rates system which are: too high a level of tax, that continues to increase annually in line with inflation; rateable values that are out of touch with current market conditions; and a system that is so complex even seasoned professionals struggle to understand it. This latest Autumn Statement is likely to disappoint business ratepayers and those hoping for signs of real reform.
