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Viewpoint - 14/12/2010

Double whammy for investors as business rate relief disappears

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Investors have been hit following the Government’s announcement that, in conjunction with a rise in the Uniform Business Rate multiplier, exemptions for owners of small business units will no longer be applicable from 2011/12.

Empty Property Rates do not work – the saving grace has been exemption for small properties

This is a big blow for developers and investors of all sizes. Paul Nash, Director of Rating, explained: “The problems of the occupational markets have been well documented since the market collapsed in 2008, but the introduction of full empty rate charges has not encouraged regeneration and development, as was intended. The one saving grace was the small property exemption.”

Following the introduction of 100% empty rate charges in April 2008, the Labour Government gave relief in 2009 to empty properties with a Rateable Value of below £15,000. This relief was carried forward into 2010/11, following the rating revaluation, but only where the new assessment was less than £18,000.

Nash added: “The relief was helpful to investors where demand was very low and where properties could be split into relatively small occupational units, but now the options for those looking to speculate on a return to growth in property values are much more limited.”

Uniform Business Rate multiplier set to increase

In a second blow, the new Uniform Business Rate multiplier is set to increase by almost 4.6% from 41.4p to 43.3p for most properties.

Nash explained: “The use of the Retail Prices Index (RPI) rather than the Consumer Prices Index (CPI) is a blow to all businesses, because the RPI is higher and ensures that, in most cases, rates will increase over and above the true rate of inflation at a time when the business environment is still sluggish.”

Localism may also cause increases in local charges

With the possibility of more ‘Localism’ announced in the Government’s White Paper this week, business is bracing itself for higher local charges and supplementary rates as the Government tries to give local authorities more tax raising powers in the wake of heavily reduced Government grants and restrictions on Council Tax increases.

Nash concluded: “The outlook is bleak for Councils, but the ability to raise more money from business in their areas is likely to prove difficult for local authorities to resist. Crossrail in London is testament of higher local charges to come.”

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