Rating in Brief

Rating in Brief: Budget 2016

Our Budget 2016 edition of Rating in Brief summarises what the Chancellor’s key changes to business rates will mean for ratepayers across England & Wales.

Download a PDF of our latest Rating in Brief or to read and sign-up to previous editions of Rating in Brief, click here.

In this issue:

Small business rates relief scheme permanently doubled

The small business rates relief scheme has been permanently doubled with effect from 1 April 2017.  

It was previously extended annually at each Autumn Statement. Small businesses who occupy properties with a rateable value of below £12,000 (up from £6,000) will pay no business rates at all from 1 April 2017. Over 600,000 businesses will benefit from this change. 

A tapered relief scheme will be implemented for rateable values between £12,000 and £15,000; from 100% relief below £12,000 to no relief above £15,000. 

Standard business rates multiplier threshold significantly increased

The upper threshold for the standard business rates multiplier (UBR) – currently used to calculate business rates on properties with a rateable value between £12,000 and £18,000 - has been significantly increased to £51,000, taking 250,000 smaller properties out of the higher rate.

Overall, over half of all business rate payers will see a fall in their business rates or not pay any business rates at all from 1 April 2017.

Annual indexation switched from RPI to CPI

Annual business rate increases are linked to inflation, with the current multiplier having historically risen in line with the Retail Price Index (RPI). 

However, from 1 April 2020, this will move to the Consumer Price Index (CPI), bringing business rates in line with the main measure of inflation and saving businesses £370m in the first year alone. 

Like other reliefs, this will have to be paid for elsewhere and we can see the supplement on the standard business rate multiplier increasing from 1 April 2017.

More frequent revaluations to be introduced

The aim is to introduce at least three-yearly revaluations and the Government will publish (another) discussion paper in March 2016.  

This will outline their options to support businesses and the stability of local authority funding. There is therefore a strong possibility that the next revaluation - currently due to take place on 1 April 2022 - will be brought forward to 1 April 2020, which would also tie in with the resetting of the business rates retention levels.   

Business rates billing and collection to be transformed

By 2022, all local authority business rates systems will be linked to HMRC digital tax accounts.  This is so businesses can manage their rate bills in one place with their other tax liabilities. No detail yet on how this will operate. 

One of the first steps is across England to standardise business rate bills to ensure rate payers have the option to pay their bills online.  The term “option” suggests at the moment that there may still be a manual system of paying too.  This is planned for April 2017.  This will be a challenge for not only local authorities but also for businesses who might have to implement major changes in the way that they currently pay their business rates. 

Our view

Paul Easton, National Head of Business Rates at Lambert Smith Hampton, commented: “While the Chancellor has announced the permanent doubling of small business rates relief, the more detailed Budget Statement says the Government will consider the feasibility of replacing small business rate relief with a business rate allowance for small businesses. 

"The difference to the current system is it would apply to a business’s total property portfolio across local authority areas thus allowing businesses that grow and acquire more property to benefit from this business rates allowance.  For small businesses, this would be a major welcome change and most small businesses who have multiple properties will then qualify for this allowance.” 

"There are some big changes here.  Three yearly revaluations, potentially from 2020, will be a first and will require changes to the appeal system and, potentially, Valuation Office Agency resources.  The changes to the appeal system are nearly upon us, with ‘Check, Challenge, Appeal’ due to be introduced through the Enterprise Bill imminently. This new system will apply from 1 April 2017, in time for the next revaluation, and will have the Government’s intended effect of reducing the number of rating appeals.  

"The Check and Challenge part will still be a part of the appeal just by another name. We have said before that, in introducing the ‘Check, Challenge, Appeal’ system, the Government has missed a huge opportunity to achieve its aim of reducing the number of rating appeals by refusing to share the rental evidence have used to calculate rateable values at the earliest stage. 


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