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Will review mean a reduction in business rates for small businesses?


Our recent survey revealed that 34% of small business owners want a reduction in business rates.

The government announced a full review of business rates in the budget this week. The review was launched earlier in the week by the Chief Secretary to the Treasury Danny Alexander.

The review could change the way businesses in England pay the tax – business rates are devolved within the UK so Wales and Scotland can set their own rates. A recent article on Business Buzz looks at what the business rate review means for small businesses.

Business rates are paid each year on around 1.8 million properties. Introduced in 1990 they are paid by occupiers of non-domestic properties such as shops, offices and guest houses.

We won’t know the results of the review until the time of the next budget in 2016. But we know that it will look at how the current system is structured and examine the different ways properties are used by businesses. It will investigate how the present system could be up-dated to ensure the current value of properties is reflected in how much businesses pay.

At the launch Danny Alexander said: “Our system of business rates was created nearly 30 years ago. Since that time, the worlds of commerce and industry have changed beyond recognition.”

He said the government had taken steps to help businesses by capping rates and bringing in relief for small businesses. He said “..now the time has come for a radical review of this important tax. We want to ensure the business rates system is fair, efficient and effective.”

In December the government said it would bring in a package worth £1 billion to help reduce the cost of business rates in 2015-16. The package will provide help to small businesses.

From the beginning of April this year the government will:

  • increase help for the high street by increasing the business rate discount for smaller retail premises with a rateable value of £50,000 or below to £1,500 to 31 March 2016. This will benefit around 300,000 shops, pubs, cafes and restaurants
  • double small business rate relief for another year to 31 March 2016. This will provide support for some of the smallest businesses (around 575,000). It will also mean that around 385,000 small businesses pay no rates at all
  • cap the rise in the business rates multiplier at 2% which will benefit all businesses
  • extend transitional rate relief. This will provide support to small businesses facing large increases in their bill as a result of the end of transition a rate relief

 

Labour will cut and freeze business rates

In response to the review, the Labour party said if it won the next election, it would cut and then freeze business rates for around 1.5 million small business properties. Labour’s shadow exchequer secretary to the treasury Shabana Mahmood said: “Britain’s businesses need more than just a re-announced review. Labour will take immediate action by cutting and then freezing business rates for 1.5 million small business properties.”

The current system is outmoded

The director general of the CBI, John Cridland said: “The current system of business rates is outmoded, clunky and regressive and holding back the high street. That’s why we’ve been calling for a wholesale review of the system.”

He said the measures which come into force in April will help to reduce the pressure on “hard-pressed retailers.”

But he said the review provided an opportunity to make further changes. He said the CBI would be “making the case for removing the smallest firms from paying business rates completely, linking rates to CPI (Consumer Price Index) rather than RPI (Retail Price Index) and introducing more frequent valuations.” He added that “This would go a long way to achieving a more competitive business rates regime that incentivises business investment and supports the high street.”

You can find out more about what small business owners want from the forthcoming general election in our Business Buzz section and find out what the recent budget means for your business.

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