Business rates package welcome but ‘outdated’ system needs to be fixedby
The government has unveiled a £13.6bn support package for businesses dealing with higher business rates bills, including freezing the business rates multiplier for another year. Retail and hospitality groups have welcomed the move but called for urgent reform to the creaking business rates system.
Delivering his first Autumn Statement as Chancellor, Jeremy Hunt confirmed that the next revaluation of rates will go ahead in April 2023 – the first update to reflect changes in property values since the last revaluation in 2017.
Hunt warned this could result in increased costs due to inflation, so stated that, to help those facing higher bills, there will be support worth £13.6bn over the next five years.
Business rate multipliers will be frozen in 2023-24 at 49.9p and 51.2p. Hunt also unveiled a transitional relief scheme, which will cap rises caused by the increase in rateable value at the next update. The caps will be 5%, 15% and 30% for small, medium, and large properties respectively in 2023/24, and will be applied before any other reliefs or supplements.
Hunt said that, for businesses seeing lower bills as a result of the revaluation, the government will make sure they benefit from the decrease in full straight away by abolishing downwards transitional reliefs caps.
The Chancellor told the House of Commons he believes the move will benefit around 700,000 businesses.
Reliefs for the retail, hospitality and leisure sectors will be extended and increased from 50% to 75% for up to £110,000 per business in 2023-24, with around 230,000 properties eligible to receive this support.
A welcome relief, but the devil will be in the detail
Melanie Leech, CEO of the British Property Federation (BPF), commented that her trade body was pleased that the Chancellor had acted to freeze the business rates multiplier and introduced further reliefs, noting that this may help prevent “a tide of insolvencies” on the high street.
“Many high street businesses have been paying artificially high rates bills for years and the Chancellor has recognised this is simply not sustainable,” said Leech.
Kate Nicholls, CEO of trade body UK Hospitality, also hailed the news as a “welcome relief”, but added that the devil will be in the detail of any announcement.
“The current business rates system remains outdated and not fit for purpose”, continued Nicholls, “and there is the very real possibility that a significant proportion of our sector will not survive the winter”.
The Chancellor confirmed the energy bills scheme will continue for a further 12 months from next April, and stated that he will continue with plans to provide targeted energy support for vulnerable sectors like hospitality after April.
ICAEW economics director Suren Thiru said: “The business rates relief package will help many struggling firms who are feeling the brunt of soaring inflation. With energy bills set to rise sharply next year, a lack of clarity over continued financial support for businesses after April will result in more uncertainty and diminish confidence further, adding to the downward pressure on business activity and investment.
Business taxes and RIP OST
Other business taxes covered in Hunt’s Autumn Statement include employers’ national insurance contribution, the threshold for which will be frozen until April 2028. The employment allowance will be retained at its new higher level of £5,000.
The VAT threshold will be retained at its current level of £85,000 until March 2026, while Hunt also announced the biggest-ever increase in the national living wage from next year, of 9.7% to £10.42 an hour (for over-23s), as recommended by the Low Pay Commission. It is expected to benefit over two million of the lowest-paid workers.
The Chancellor also set a new UK target of reducing energy consumption from buildings and industry by 15% by 2030, along with new funding for energy efficiency of £6bn from 2025.
Hunt also stated that he would not be introducing a specific online sales tax, with the decision reflecting “concerns raised about an online sales tax’s complexity and the risk of creating unintended distortion or unfair outcomes between different business models”.
The Association of Taxation Technicians (ATT) labelled the move as “sensible”, given the impracticality of implementing such a levy.
Senga Prior, Chair of ATT’s Technical Steering Group said it would have been “impossible” to make the online sales tax simple.
“There were several issues which would have needed addressing, in particular those around scope and boundary,” said Prior. “For example, would ‘click and collect’ orders be subject to the tax or exempt? What about overseas sellers and small-scale entrepreneurs who sell on internet marketplaces such as eBay? The idea of addressing issues regarding an existing tax, in this case business rates, by introducing an entirely new and potentially very complex tax was puzzling.
“It is sensible to drop what would have been an overly complex solution to an issue which arguably just reflects changes in customer preferences and technological developments."