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Business rates in the news

The revaluation of business rates, due in April for the 2017/18 tax year, has seen plenty of coverage and controversy.

Business rates must be paid by all businesses whose properties (commercial premises) have a ‘rateable value’ over £12,000. Within this, wide variations have emerged in which businesses will pay more and which will pay less.

The list of ‘winning’ and ‘losing’ industries published by The Times last week is fascinatingly diverse. Polo grounds are winners; power generators are losers. Cement works are winners; cemeteries are losers. Zoos lose; bingo halls win. Livestock farms will see their bills beefed up; fish farms may not have to pay business rates at all (‘subject to strict legal requirements’).

Even royalty is affected. Buckingham Palace has to pay businesses rates because it is counted as a non-domestic property. Perhaps Her Majesty should have pushed its nickname “Buck House” a little more, and the Royal Family’s nickname “the Firm” a little less. While Buckingham Palace’s business rates bill will increase by £60,000, Westminster Palace will see a reduction of more than twice that figure. The Queen may have to take this up with HMRC – or, as she may prefer calling it, ORC (One’s Revenue & Customs).

More broadly, The Times noted that 510,000 businesses will have an increase in business rates. This is higher than the number whose rates won’t change (420,000) and much lower than the number whose rates will decrease (920,000).

But for many of the 510,000, the increase is steep. Our property specialist Myfanwy Neville comments: “The rates increase has been compounded by the timing of the two valuation periods – the last being during 2008’s recession, and the fact that the government’s delay in implementation resulted in two years’ more growth for property values. The result is the largest percentage rates increase for many years, at a time when exchange rates, national living wages and uncertainties around Brexit are already causing enough problems for UK businesses.”

The impact of the increases could send out ripples from the City of London, where business rates for offices are expected to rise by £1.4 billion (one third) over the next five years, according to The Telegraph. It reported claims that this could damage the City’s standing as a major financial centre after Britain leaves the EU.

The media have also conveyed widespread worries about the effect on the high street. Independent shops, pubs and restaurants, especially in London, seem to be most at risk of closure as they try to accommodate higher business rates. David Gauke, Chief Secretary to the Treasury, has criticised “scaremongering [over] a process that is making the system accurate and fair for everyone”, adding that the government has introduced a £3.6 billion support fund for affected companies.

This is one example of politicians hitting back at media coverage of the business rates revaluation. Mr Gauke, along with Communities Secretary Sajid Javid, commented on ‘a relentless campaign of distortions and half-truths’. They did this via what was intended to be a private letter to Conservative MPs. The long-lived Palace of Westminster, it seems, is struggling with leaks of both kinds. Maybe they could use that £142,572 business rate saving of theirs to help mend the roof.

When Sajid Javid was Business Secretary, we hoped that he wouldn’t trigger too many red alerts. Keen to avoid this over business rates, he has now commented on the need to “make the system fairer” and “provide further support to businesses facing the steepest increases”, suggesting there would be “an announcement at the time of the Budget”.

It will be interesting to see what the Budget delivers, and how effectively the government can diffuse the tensions that threaten to put the ‘berates’ into ‘business rates’. In the meantime, if you are worried or uncertain about how business rate changes will affect your business, or have questions about property tax in general, we would be pleased to hear from you: please get in touch with your usual BKL contact or use our enquiry form. You may like to read our briefing on the new appeals process for business rates and how you it might benefit you.

Myfanwy Neville

Partner, Property and Construction

T +44 (0)20 8922 9376
E myfanwy.neville@bkl.co.uk

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