Retail groups and others had been lobbying government with regard the impending large increase in business rates payable from 1st April next year. The rise in business rates is based on the RPI figure in September which showed inflation of 5.6% which will result in the largest increase for over 20 years.

The Chancellor’s response in the Autumn Statement will do little to help the ratepayer as the increase will still go ahead. However, businesses will be offered the opportunity to defer payment of 60% of the increase, and repay the deferral over the following two years.

For example, the ratepayer of a property with an RV of £20,000 will see an increase of £480 next year, but will be offered the option to have this increase reduced to £192. No doubt this will be welcomed, but the remaining £288 will still have to be paid by an addition of £144 to the rate bills for 2013 and 2014. This will be on top of the anticipated rise in business rates for those years which, if inflation does not come down, will be in the region of £500 for a property with an RV of £20,000.

The Business Rates Deferral Scheme is not new. It was introduced in 2009 to cushion the impact of the combined effects of 5% inflation and the loss of transitional relief.

The deferral of payments from one financial period to another can be an administrative nightmare for both businesses and billing authorities. The previous scheme had a very low take-up and many of the ratepayers that did option for deferral have seen the benefit to cash flow outweighed by the increased administrative burden. The scheme may be welcomed by some, but based on the experience of the 2009 scheme, the Chancellor can be confident that many businesses will prefer to “take the hit” now rather than commit to paying more later.

Extension to Small Business Rates “Holiday”

There was one other business rates item in the Autumn Statement which will be more welcome. The business rates ‘holiday’ for small businesses has been extended for another 6 months and will now end on 31st March 2013. This enhanced Small Business Rates Relief Scheme was introduced as a temporary measure, for one year only, from 1st October 2010 and was extended for another year in the last Budget.

The scheme means that Small Businesses occupying a property with an RV of 6,000 or under will pay no rates at all. Those in properties with an RV between 6,000 and 12,000 receive Small Business Rate Relief at a more generous level than the previous scheme allowed.

Business Rates continue to be one of the biggest expenses a business can have and the rules relating to the amount payable are increasingly more complicated. This makes it even more important for all ratepayers to seek advice on Rating Appeals, Rate Liability Management, and Rating Audit from a Business Rates Specialist.

Mark Rigby, Chief Executive of CVS – the business rates experts, “The Chancellor’s Statement was disappointing as SMEs still face the biggest increase in business rates for 20 years. The increased amount is still ‘to kick in’ and the option to defer some of the payment will do little to soften the blow. CVS would urge businesses to seek professional advice and challenge these increases and overall business rates.”

CVS are Business Rates Experts, employing surveying and valuation specialists to support SME and Corporate businesses in challenging and reducing business rate costs.

Richard Knox

30th November 2011