Retailers and high street businesses are set to receive a boost following a smaller than expected rise in business rates.
While business rates, a tax on the occupation of non-domestic property, were expected to climb by 3.2 per cent in 2014, this has now been changed. The figure would have been in line with the September retail prices index measure of inflation, but George Osborne will now be forfeiting a reported £300 million by dropping the figure.
The chancellor has also announced that the government will be extending a scheme that offers rate relief to certain small businesses.
During his speech, Osborne said, ‘All businesses are expecting rates to rise by 3.2 per cent next year. Instead, I will cap the inflation increase in business rates for all premises at 2 per cent from next April.’
‘We will also allow businesses to pay their rates in 12 monthly instalments and clear almost all of the backlog of valuation appeals by July 2015, with reform of business rates on the agenda for the 2017 revaluation.’
Vince McLoughlin, partner at business and tax advisory firm Russell New, comments, ‘Something had to be done with business rates and by extending the relief beyond April, this gives businesses of all shapes and sizes some breathing space in which to grow and boost local economies in 2014.
‘The government now brings in £27 billion from business rates; this is more than council tax and fuel duty. Freezing business rates has eased the burden on businesses and given time for the tax to be reformed over the next couple of years.’
McLoughlin believes that, with greater relief, SMEs now have an incentive to make crucial investment decisions, some of which may have been delayed waiting for this announcement.
More on the Autumn Statement 2013:
- Business rates capped at 2 per cent to aid SMEs
- Government announces ‘big extension’ to Start Up Loans scheme
- Jobs tax on staff under 21 abolished
During the Autumn Statement 2012, the government extended the doubling of the Small Business Rate Relief (SBRR) for a further 12 months to April 2014. As part of Osborne’s latest set of proposals, a further extension of the doubling of the SBRR to April 2015 has been confirmed. This means, the government says, that around 360,000 of the smallest business will continue to receive 100 per cent relief from business rates until April 2015 – with around a further 180,000 benefiting from tapering relief.
Shalini Khemka, founder and CEO of E2Exchange says, ‘It is excellent that the chancellor has used this Autumn Statement to give a much needed boost to start-up businesses and SMEs, particularly with regards to business rates.
‘However, we would like to see further reform of this area. Business rates should reflect a company’s performance, rather than the rateable value of the property from which they are running their business, to ensure a completely fair system.’