The Government is coming under fire once again over the controversial issue of business rates.
With the new rates due to take effect in April, the first change in almost a decade, new figures from the Treasury suggest that the Government stands to collect an extra £1billion in business rates next year.
The revelation has quite rightly incensed businesses. After all, the revaluation of business rates was supposed to be “revenue-neutral”. However, forecasts show that revenues are in fact expected to increase sharply after April, with the Government taking £25.5billion from the charges in 2017/18 – up from £24.5billion last year.
Even after taking business rates appeals into consideration, which could reduce revenues by £1.3bn – the Government normally sets aside between £1.2bn and £1.5bn for business rates miscalculations – revenues will still rise by £300m.
Furthermore, between 2013 and the end of next year business rates will have risen by more than £3bn.
Business rates on non-domestic properties haven’t been revalued since 2010, when they were based upon 2008 values. Thus during the last recession buildings were still valued at inflated pre-recessionary levels.
In September last year the Valuation Office Agency (VOA) published the draft revaluation details of nearly two million non-domestic properties for the draft 2017 rating list. Across England, rateable values are expected to rise by an average of around nine per cent, ranging from a 22.8 per cent increase in London to a 1.1 per cent fall in the North East.
Despite the Government’s claim that nearly three quarters of businesses will actually see no change, or even a fall, in their business rates bills, that still leaves a high number of businesses who, come April 1st, can expect a significant hike in their rates.
It is worth noting that around 600,000 small businesses are paying no business rates at all thanks to the exemptions introduced by the Government. And for those ratepayers faced with a large rates increase, the business rates transitional relief scheme will help soften some of the blow.
Transitional rate relief was introduced to limit how much business rates can rise or fall in a financial year. It is essentially a cushioning effect of any large increase or reduction in rateable values.
These latest revelations have shone the spotlight on business rates once again and serve to further highlight the need for reforming the current system to make it fairer for everyone.
But with the Treasury’s coffers set to be boosted by £1bn there’s little incentive for Whitehall to fix it if financially it isn’t broken.
Businesses, of course, would argue otherwise.