Businesses accuse chancellor of ignoring rate concerns in budget

Philip Hammond criticised as he unveils measures including cap on increase in rates for companies losing small business relief

Business leaders have responded to the budget by accusing the chancellor of not listening to their concerns about business rates, despite Philip Hammond announcing a £435m relief package.

The government has been under mounting pressure to take action on business rates because a revaluation of property in Britain means some companies will see their tax bills more than double from April.

Hammond unveiled three measures designed to delay tax increases for businesses affected by the revaluation – including specific help for pubs – and said the government would unveil plans to change the rates system later this year.

However, critics described the announcements as “sticking plasters”, pointing out that most businesses will still end up paying the new levels of tax set by the revaluation and criticising the lack of reform to the business rates system. Hammond indicated that more frequent revaluations – which would stop the wild fluctuations in the amount businesses have to pay – would not be introduced before the next revaluation in 2022. This is despite George Osborne pledging to make revaluations more frequent, to reduce the bill-shock linked to long gaps between revaluations, in his budget last March.

The budget document shows that despite the chancellor’s measures to help businesses hit by big increases, the income the Treasury receives from business rates will rise from £28.8bn this year to £33.7bn in 2022.

The business rates measures announced by Hammond included:

  • Any firm which has lost small business relief due to the revaluation will have the increase in their tax bill capped at £50 per month or £600 a year.
  • A £1,000 business rates discount this year for pubs with a rateable value of less than £100,000, which the chancellor said would cover 90% of Britain’s pubs.
  • £300m over four years for local authorities to offer discretionary discounts to businesses in their area.

Following the budget, the government also announced it was softening controversial proposals that would have made it more difficult for businesses to appeal against their rates bill.

However, property consultants said businesses would still struggle to challenge their tax bill under the plans, and that it was another disappointing response to criticism of rates.

Jerry Schurder, head of business rates at property consultancy Gerald Eve, said: “This budget showed a spectacular lack of ambition from the chancellor, who has missed a gilt-edged opportunity to grasp the nettle of business rates reform.

“New reliefs will be welcomed by the lucky few, but in truth the £435m of new assistance was no more than kneejerk tinkering designed to take the edge off the worst rises and secure some positive headlines. The measures give the impression of a government that is listening to business, but are actually a pathetic attempt to kick the issue into the long grass.

“Yet another consultation into more frequent revaluations is time-wasting of the highest order, condemning UK plc to an inflexible and punitive system for at least five years, during which time it will have to adjust to the fallout from Brexit. Firms have given their views on business rates at least five times since 2013 and it’s time the government acted on this information.”

The £435m relief package will be spread over five years and is a small proportion of the £28.8bn that business rates will generate this year. Approximately 25,000 small businesses will benefit from the £50-a-month cap, but this is worth just £25m a year. While the cap will delay the onset of the higher level of tax set by the revaluation, the firms will still end up paying it eventually. Furthermore, just £180m of the £300m discretionary fund will be available this year. Given there are 326 local authorities, this means councils will receive, on average, just £552,000 each.

The Treasury was also unable to confirm how many pubs would actually receive the £1,000 discount. Although 36,000 pubs have a rateable value of less than £100,000, pubs that are part of chains such as Wetherspoons will have their discount restricted due to EU state-aid laws.

Labour MP Toby Perkins, who has campaigned for the government to help pubs, said: “I welcome any action that will mitigate unfair business rates impact on pubs, but for many pubs, their rise got £1,000 smaller, [there was] not a cut.”

Businesses in London, where there will be a £9bn increase in business rates over the next five years, were particularly critical of the government’s proposals.

Sir Peter Rogers, the chairman of New West End Company, which represents businesses in the West End, said: “The short-term relief he announced will have no impact on the majority of the companies in London and the West End that will suffer massive tax increases on 1 April. This will mean closures and job losses.”

During his budget speech Hammond hinted at a wide-ranging review of business rates in the future that would consider the taxation of digital businesses. The latest revaluation has led to Amazon warehouses having their rates bills cut, while high streets across the country see their taxes increase. “It is certainly true, in the medium term that we have to find a better way of taxing the digital part of the economy,” he said.

The chancellor also confirmed he would announce plans later this year to hold revaluations of business rates at least every three years, instead of the seven years between the latest revaluation and the previous one in 2010. However, this will not come into force before the next scheduled revaluation in 2022.

Mike Coupe, the chief executive of Sainsbury’s, led calls for an overhaul of the tax, describing it as archaic. “Business rates are an analogue tax, not fit for the digital age,” he said. “The UK needs wholesale reform of business taxation. We would ask the government to carry out a root-and-branch review of business taxation to create a level playing field across all businesses, rather than penalise property-based companies.”

The car industry said business rates could block new investment in the sector just at it tries to cope with the uncertainty caused by Brexit. Mike Haws, chief executive of the Society of Motor Manufacturers and Traders, said: “UK automotive plays a critical role in the country’s economy but future success will depend upon maintaining competitiveness. It’s disappointing, therefore, that the chancellor hasn’t prioritised additional funding for supply chain development, nor addressed the flaw in business rates that disincentivises investment in plants and machinery.”

Adam Marshall, director general of the British Chambers of Commerce, said: “However welcome, measures that mitigate the short-term impact of business rate rises are little more than a sticking plaster. The radical changes needed to improve the broken business rates system will have to wait for another day.”


Graham Ruddick

The GuardianTramp

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