Small firms still waiting for promised rates relief but help is finally on its way

Friday, June 2, 2017

Confusion surrounds the £115million tax relief scheme introduced at the Spring Budget aimed at helping the smallest most vulnerable firms who had lost all or part of their small business rates relief.

Despite the announcement being made at the Budget, small firms are yet to receive the "cash benefit" with firms warning of bankruptcy, despite £25million being earmarked this year.

Following reports of small firms facing business rates hikes of up to 3,000%, which the Government initially dismissed as "scaremongering", the Department for Communities and Local Government had repeatedly said: “no small business will see more than a 5 per cent increase this year". This was despite the £3.6billion in transitional relief caps which limit how fast bills can rise, not protecting those firms exiting the small business rates relief scheme after 7 years.

Those businesses had been referred to as facing "an alarming Cliff Edge". Our analysis found a total of 24,986 firms had lost all or part of their small business rates relief.

Under the Revaluation, which came into force last month, 1,552 firms went from paying no business rates at all to losing their relief completely. We also know that 21,751 firms lost their tapered relief, and 1,683 firms are going from no rates to the new thresholds for tapered relief.

The smallest of firms are facing tax hikes in rates of £45.85million, an average increase of £1,835 per property. This equates to an increase to some 62% in tax payable in comparison to 2016/17, following the great rates shake-up.

Chancellor Philip Hammond, at the first Spring Budget in March, announced to move to towards capping bills for those small firms that were to be pushed over the threshold for small business rate relief last month by an additional £50 a month, limiting annual rises to £600 per year.

In a letter from DCLG to all Councils, finance bosses were told on 9th March, "the Government expects billing authorities to grant supporting small business relief to qualifying ratepayers" adding "the Government is not changing the legislation and will reimburse billing authorities".

But, two and a half months after the Budget and nearly two months since the start of the new tax regime when demands fell due for payment, small firms across England are reporting that their relief is not getting through.

London Borough of Tower Hamlets said "We are waiting for the government to confirm the funding regulations for the scheme. When they do, we will be able to allocate funds to eligible businesses."

A spokesman for Darlington Borough Council said "We are now awaiting further guidance from the Department for Communities and Local Government to allow our system to be upgraded, which will now be after the General Election."

Although local authorities are legally able to go ahead and adjust tax bills, without the necessary published guidance from Government, they had no guarantee they would receive the money back from Whitehall.

We believe that a common sense approach is needed. The money to help those most in need is coming from Government and there is no reason why revised tax demands shouldn’t have been sent out by local Councils by now. These delays are simply causing panic, confusion and alarm for small firms.

But, within the last few days, DCLG has reportedly written to local authority Chief Financial Officers in England now with the necessary paperwork to ensure the relief starts to flow.