Many smaller firms are “on a cliff edge” as they wait for local councils to implement a business rates relief fund intended to support those most affected by the April 2017 revaluation, property specialists have reported.
The allocation of the government’s £300m discretionary relief scheme to local authorities was notified in April, a government minister pointed out during a House of Lords debate last week, adding that councils “should pass on that money”. But some councils are still engaged in consultation with businesses and residents over distribution of the funds. Tameside’s consultation runs until 15 August, while Haringey’s ended in May. The London borough of Bromley announced on 20 July that, following consultation, its scheme will be implemented “later this year”.
It is disappointing, London Councils chair Claire Kober said, that the government had “chosen to criticise local government for delays which are beyond its control, rather than dealing with the underlying issue – the business rates valuation system itself”.
Meanwhile thousands of companies that may qualify for the relief have received higher rates bills, The Times reported on 24 July. Data suggests that “the smallest of firms” are facing an average increase of £1,835 per property, according to CVS, the business rents and rates specialists.
Temporary reliefs were announced in the budget to provide support over and above the existing transitional reliefs –
- a “supporting small businesses” scheme, limiting increases where a business loses either some or all of its small business rates relief (or the benefit of the smaller multiplier);
- the £300m discretionary relief scheme, allowing local authorities to deliver “targeted support to the most hard-pressed ratepayers”; and
- support for pubs in the form of a £1,000 discount for those with a rateable value below £100,000.
‘The bailiffs are going in’
The government has pointed out that revaluations are fiscally neutral – there are winners as well as losers. But Mike Cherry, national chair of the Federation of Small Businesses, has warned that the delay in distributing the £300m fund has left many businesses “on the brink”.
“Some authorities have already issued reduced bills, and we continue to urge other councils to follow suit as quickly as possible,” said Lord Bourne of Aberystwyth, parliamentary under-secretary at the Department for Communities and Local Government during the Lords debate on 19 July. But the Conservative peer Lord Naseby said “the bailiffs are going in” in certain areas.
Some councils, such as Leeds and Haringey, have “set a good example” and the government wants others to do the same, Lord Bourne replied, adding that “we want them to be innovative”. Asked to confirm that one problem holding up implementation of the relief was “with the IT software provided to local councils by private suppliers”, Lord Bourne said the software issue related only to the existing small business rates relief. “It would not apply to the discretionary relief,” he said.
CVS chief executive Mark Rigby pointed out that councils can adjust rates demands manually. “So, frankly, it is ridiculous that it will take nearly seven months from the budget for small firms to receive the help they were promised and so badly need,” he said. “A common sense approach is needed. The money to help those most in need is coming from government and there is no reason why revised tax demands shouldn’t have been sent out by local councils by now.”
Rigby added: “We would urge councils to show restraint and refrain from enforcing business rates bills against likely recipients of the reliefs during the delay period and to display an empathetic approach. These delays are simply causing panic, confusion and alarm for small firms.”
Business rates – an overview
Non-domestic rates are levied in respect of commercial property as a contribution to the cost of local services. Business rates are devolved to Scotland, Wales and Northern Ireland, where the rules vary.
Part III of the Local Government Finance Act 1988 sets out the framework. A multiplier set by national government is applied to a property’s rateable value, as assessed by the Valuation Office Agency (VOA) of HM Revenue & Customs, to arrive at the annual charge.
Local authorities collect business rates and pay a proportion over to the central government, which redistributes funds in the form of grants. Details of current and proposed arrangements for local authorities to retain a proportion of business rates are set out in a House of Commons briefing published in April and updated in July.
The VOA website provides guidance on business rates and explains that a property’s rateable value normally represents the rent that the property could have been let for on a certain date. That may not be the actual rent charged, because various assumptions are made – such as the property being vacant and in reasonable repair.
The multiplier for properties in England is currently 47.9 pence per pound of rateable value, or 46.6 pence if the rateable value is £51,000 or less. Small business rates relief is available where the ratepayer occupies a single property whose rateable value is £15,000 or less. The relief is 100% where the rateable value is £12,000 or less.
The revaluation scheduled to be implemented in 2015 in England, Scotland and Wales was delayed until April 2017, and was based on rateable values at 1 April 2015. Philip Hammond, the chancellor of the exchequer, recognised in the March 2017 budget that there was “scope to reform the revaluation process, making it smoother and more frequent, to avoid the dramatic increases that the present system can deliver”. The government would consult on its preferred approach before the next revaluation, Hammond said.
Andrew Goodall is a freelance tax writer and journalist.