The Chancellor has announced plans to scrap business rates for properties with a rateable value of £15,000 or less from April 2017.
The move comes at the end of a two-year consultation on the issue and has been broadly welcomed by the small business community.
The measure, announced as part of a raft of Budget measures designed to appeal to small businesses, more than doubles the current small business rate relief threshold of £6,000, and will be introduced permanently rather than on a temporary basis.
Business rates will also be linked to the Consumer Price Index (CPI) from 2020, shifting from the current Retail Price Index (RPI). The move is expected to deliver savings of £1.6bn over the next five years, a measure for which many business lobby groups, including the CBI, has long campaigned.
Osborne also announced that the government planned to "radically simplify" the administration of business rates.
The move was welcomed by ACCA head of taxation Chas Roy-Chowdhury: “Finally we’ve seen some movement on this, with business rates relief more than doubled to £15,000, meaning more than 600,000 small businesses will pay not business rates at all.”
All businesses will benefit from a cut in corporation tax to 17% by 2020, a percentage point lower than was announced in last summer’s Budget.
A ‘marmite moment’
Chris Sanger, head of tax policy at EY, commented that the measures were a “marmite moment” for those paying business rates, with small businesses likely to reap 95% of the £6.7bn cut coming from the long period of consultation, leaving large businesses with only the shift from RPI to CPI.
“Manufacturers and larger retailers will be disappointed with the lack of action by the government”, continued Sanger, “with those sectors currently paying 40% but only constituting 16% of the economy. This retains the distortions in the current system, deterring manufacturers from improving their buildings and penalising the largest bricks and mortar retailers.”
The Chancellor also continued his ‘devolution revolution’, stating that by 2020 all local government resources will be drawn from their own area.
The Greater London Authority will move to full retention of business rates from April 2017 - three years earlier than previously thought – while the government will also pilot the approach in Liverpool and Greater Manchester.
“The decision to devolve business rates to the Greater London Authority in London by 2017 is interesting”, commented Chas Roy-Chowdhury. “It is right that rates are retained by the area in which they are paid, although we could end up with areas of the same countries competing against each other, and when you have competition there is always a loser.”