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Osborne promises business rates revolution

One of the biggest bugbears of small businesses may be about to be resolved following George Osborne, the british energy costsChancellor of the Exchequer’s, apparent commitment to restructure business rates in his Autumn Statement

The tax take from business rates is expected to have increased 40% between 2008 and 2018 with an increase of £133m in this current year alone.

The rates, which are calculated on the rental value of the premise within which the business is located have long been controversial prompting the British Retail Consortium to say that there was:

“Strong consensus – from retail and property to manufacturing – that we need more fundamental reform [to the business rating system] because the existing system is no longer fit for purpose.”

As part of the Autumn statement Osborne committed to having new proposals for the structure of the rating system in place before the 2016 budget, these proposals are intended to focus on how the burden is shared rather than the overall tax take.

The Chancellor also committed to capping annual rate rises at 2% and to extending small business rate relief. The scheme which exempts businesses with a rateable value of less than £6,000 and which offers tapered relief for those valued up to £12,000. Discounts available for high street businesses with a rateable value up to £50,000 will also be increased from £1,000 to £1,500.

In total this removes 360,000 businesses from the rating system and minimises the cost for another 180,000. However estimates suggest that despite this≥ 1.8m commercial properties remain subject to business rates and of these at least 1/3 are small businesses that pay less than the levy costs to collect.

As a result some commentators have called for a more radical amendment with Simon Tivey, Head of Rating at PwC saying:

“The review should consider taking those very small properties out of the system altogether.”

Whilst David McCorquodale, Head of Retail at KPMG said:

“This extension of rates relief and discounts is merely a short-term sticking plaster solution. All eyes are on the wider overhaul of this archaic system, which must be changed to level the playing field, so retailers with store networks can compete more fairly with their online competitors”

Whilst a commitment to reviewing the current misaligned structure of the rating system is long overdue following a series of false dawns, few small businesses will be holding their breath at the promised restructure, for now then the great business rate rip off will seemingly continue.