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Business Rates Revaluation – the Lowdown

If you’re a small business owner, you’re sure to be aware that business rates here in the UK will undergo a revaluation process by the Valuation Office Agency with the revised rates coming into force beginning on 1st April, 2017.  There’s been a lot of misinformation about this process which has led to worry and confusion, especially among smaller business owners who often struggle to maintain a steady cash flow and stay out of debt.  Business rates in their current form were first introduced in 1990 to replace a variety of local property taxes.  Business rates become part of the rental cost of business premises and an increase in business rates will naturally be passed on in the form of higher rents.  The total cost of occupying a space or building is what matters to the tenant and how much of it is made up of rent and how much by rates is not particularly relevant to the business owner.

The government is required to update the rateable values of business properties on a regular basis to ensure that businesses pay the right amount of rates.  The revaluation aims to make the whole system more accurate by ensuring that business rates bills reflect the property market.  Nearly 75% of businesses are likely to see no change or even a reduction in their business rates from April 1st and a whopping 600,000 businesses are set to pay no business rates at all.  It’s predicted that the City of London will bear the brunt of the revaluation with an increase of 35.5% between 2014-15 and 2017-18.  Most other parts of the country are likely to experience a welcome decrease (more than 50% for the luckiest ones) which it is hoped will lead to greater property investment in many areas.  

As part of a £6.7 billion package of business rates cuts over the coming five years, the Small Business Rate Relief has been permanently doubled and eligible properties with a rateable value of £12.000 or less will receive 100% relief.  Eligible properties with a rateable value of between £12,000 and £15,000 will also benefit from business rates relief, leading to significant reductions on their business rates bills.  Any business owner who thinks that their business will be eligible for business rates relief should get in touch with their local council to apply.  There is also a transitional relief scheme which aims to support ratepayers by capping and phasing any rise in bills.

Government ministers are insisting that the revaluation will not increase the amount of tax being paid into the Treasury, but would adjust the burden of business rates so it accurately reflects the shape of the British economy.   This means that for every £1 that a business rate goes up in one place, another business rate in a different place will go down by £1.

There are more changes to come over the next five years – from April, 2020, business rates will no longer be linked to the Retail Price Index (RPI) as they are now, but to the Consumer Price Index (CPI) which could save businesses in Britain up to £370 million in total the following year alone.

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