One of the biggest stories in the UK over the last two weeks has been the government’s revaluation of business rates in the UK – a move viewed as a significant threat to viability by some smaller operators.
There has been a sizable backlash from business owners, commentators, Labour politicians and even Conservative MPs. These objections have been handled quite poorly by the Treasury and the Communities Secretary Sajid Javid, who adopted a Trump-like stance of blaming the media for “distortions and half-truths”.
It seems the Treasury has underestimated both the negative impact the new changes will have on a large proportion of businesses and the reaction to megabucks internet companies such as Amazon getting an easier ride.
There have been a few twists and turns in the story, so we’ve decided to make things as simple as possible for anyone feeling a little behind the curve:
- The new rates will come into effect on 1 April 2017. They are reviewed every five years, but the current review has happened after seven due to a delay that the government said was “to protect businesses from volatility”. Unfortunately, the disparity between property prices in different parts of the country mean that the impact of the new changes will be even more dramatic. Critics also pointed out that the inevitable price hike would have affected businesses in Tory heartlands just months before the general election.
- Any business with a property over the value of £12,000 pays rates, with some relief for those between £12,000 and £15,000.
- The average rise over the next year for businesses is to be 177% (The Guardian).
- Smaller businesses have called for the rates to be linked to turnover, rather than property value as they currently are. They essentially work in the same way as Council Tax.
- Thirteen major business groups joined have now joined a law firm to both oppose the new hikes and also suggest that the clause blocking appeals by smaller businesses is unlawful.
- Chancellor Philip Hammond has stopped some way short of a climb-down, but has revealed that he’s listening to business opinion on the subject. The government is now under pressure from all angles, including its own party, due to the poor handling of the situation by Sajid Javid and David Gauke, the Treasury’s chief secretary, who are rumoured to have underestimated the rises by 5-7% in a letter sent to Conservative MPs.
- Rates won’t be sky-rocketing for everyone. Parts of the country with less valuable property will actually see rates drop. Former Charncellor George Osbourne’s constituency in Cheshire is forecasting an 11.8% reduction in business rates, which is typical of the situation in many Northern areas.
- Sajid Javid appeared in Commons on Wednesday 22 February, where he softened his approach with a more sympathetic ear. He said: “I’m working closely with my right honourable friend the chancellor to determine how best to provide further support for businesses facing the biggest increases. We expect to be in a position to make an announcement at the time of the budget in just two weeks’ time.”
It looks like the budget will be watched with even more intrigue this year, as if Brexit and the plummeting Pound hadn’t already put enough pressure on Mr Hammond to deliver.