Today’s Budget speech offered a welcome relief to British businesses struggling to absorb this April’s business rates revaluation.
In his speech, the Chancellor yielded to calls from business lobbies to hasten the planned switch from using RPI to CPI. The switch will come into effect in April next year, two years earlier than previously planned.
From April, rates will rise in line with the lower Consumer Prices Index (CPI) measure of inflation, not the higher, more old-fashioned Retail Prices Index (RPI).
Business rates were set to rise next year in line with September's RPI of 3.9%. The CPI from the same month stood at 3%.The change represents a £2.3bn reprieve for the UK’s rate-paying businesses.
The £1,000 business rates discount to pubs with a rateable value of less than £100,000 has been extended until March 2019.
The immediate relief of the swap to CPI will be complemented by another longer-term change to business rates. “I can announce today that after the next revaluation, future revaluations will take place every three years,” the Chancellor said.
Ostensibly, the shorter period will reduce the size of valuation changes, making them easier to manage. The FSB’s national chairman Mike Cherry welcomed the switch, but warned: “the delivery of this pledge must be carefully thought-through”.
“It can’t be allowed to inadvertently place additional burdens on small firms or require them to hire a surveyor just to get their bill right.”
Staircase tax: a step too far
That wasn’t the only change announced around how the Valuation Office Agency goes about its business: the Chancellor has put a stop to the so-called ‘staircase tax’. The staircase tax stems from a 2015 Supreme Court ruling relating to how you define a single business space.
Subsequently, the VOA started allocating different bills for individual floors and workspaces linked by public areas, ie stairs. It meant substantial bill increases for companies that occupy separate floors of a single building.
“We will change the law to ensure that where a business has been impacted by the Supreme Court ruling it can have its original bill reinstated if it chooses, and backdated,” Hammond said.
Commenting on the staircase tax relief, the FSB’s Mike Cherry said: “ The Chancellor has done the right thing by reinstating original business rates bills. We hope the end of the staircase tax marks the first step towards wholesale reform of the regressive business rates system.”
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.