The 2015 Autumn Statement was a mixed bag for business rate payers, with small businesses benefiting from an extension of the small business rate relief scheme and the introduction of 26 additional Enterprise Zones.
However, much uncertainty still surrounds the planned devolution of the business rates system and may lead to wide variations in payments across the regions. Paul Easton, National Head of Business Rates at Lambert Smith Hampton, explains the implications of the 2015 Autumn Statement for ratepayers.
Extension of small business rate relief scheme
As expected the small business rate relief scheme that exempts certain ratepayers from paying any business rates and reduces the amount paid by others (around 400,000 pay no business rates at all) has been extended to 31 March 2017, the final year of the current 2010 business rates revaluation period. It was almost inconceivable that the Chancellor would not extend this additional relief for small businesses and it will be welcomed by all who currently benefit from it. Most would not however have budgeted for a rates bill in 2016-17 or a higher rate bill if this relief had not been continued with.
Expansion of Enterprise Zones
The Chancellor also announced an increase in the number of Enterprise Zones, demonstrating a commitment to encouraging business growth.
Enterprise Zones provide businesses with many benefits, including zero business rates subject to the State Aid rules. In total there will be 44 in England – 18 new, 24 existing (of which eight have extensions), plus Blackpool Airport and Plymouth Enterprise Zones which were previously announced in the Budget that took place in March 2015.
More than a third of all the new zones will be in the North of England, as part of the Government's Northern Powerhouse promise. To see the full list click here.
Devolution of business rates
The Chancellor also reminded us that, from 2020 onwards, councils will be able to keep all the business rates they collect, while the current nationally set business rates multiplier/UBR will be abolished. Where there are elected mayors they will have the power to raise extra business rates provided this is spent on infrastructure projects. Local government will be given power to reduce business rates as much as they like to boost enterprise and economic activity in the area. The core grant from Whitehall will be phased out with local government taking on new fiscal responsibilities by 2020.
There is still little detail available on this game changing proposal that was unexpectedly announced recently. Many have commented that they can see a return to wide variations in business rate payments across the regions and uncertainty for businesses trying to budget this significant outgoing.
As part of the move towards 100% business rate retention, the Chancellor also announced that the Government will consult on options to fully fund local authorities’ public health spending from their retained business rates receipts.
All these reforms have the backdrop of fiscal neutrality being retained. Consultation by DCLG on the process will take place during 2016.
Relief schemes scrapped
Perhaps the biggest blow to ratepayers – other than the lack of clarity around business rates reform – was the Chancellor’s decision not to extend certain business rates relief schemes.
Read our summary of what wasn’t included in 2015 Autumn Statement and Spending Review and its likely impact on business rate payers here.