Chancellor George Osborne has announced a package of reforms to business rates which he says is designed to help businesses grow and create jobs and to provide support for the high street in the face of the switch to online sales.
In the Autumn Statement, Osborne confirmed the cap on the Retail Prices Index (RPI) increase in business rates in England will be 2% in 2014-15. With effect from 1 April 2014 businesses will be able to pay in 12 monthly instalments, rather than over ten months as at present.
In addition, the government will extend the doubling of the Small Business Rate Relief (SBRR) for a further 12 months from 1 April 2014, which it says will help 540,000 firms. The SBRR rules will be relaxed to allow businesses taking on an additional property to retain SBRR on the first property for one year, with effect from 1 April 2014.
In the week which culminates with Small Business Saturday, Osborne announced new measures to help smaller companies. These include a business rates discount of £1,000 for retail and food and drink premises with a rateable value below £50,000 for two years from 1 April 2014.
As part of a move to help the high street combat growing competition from online retailers, Osborne said the government will introduce a new 50% business rates reoccupation relief for 18 months for businesses that move into retail premises that have been empty for a year or more. To be eligible, businesses must move into vacant shops between 1 April 2014 and 31 March 2016.
Chris Sanger, EY's global head of tax policy, said: 'By spending over £1bn next year on business rates, the Chancellor has shown that he has been listening to the pain felt by businesses through a system that has its origins in the Poor Laws of 1601 and was updated in 1990 alongside the introduction of the poll tax.'
While welcoming the immediate changes to reliefs, Sanger said the most important element in the Chancellor's speech was the announcement that the government intends to publish a discussion paper in spring 2014 setting out the advantages and disadvantages of different options for longer-term reforms to business rates administration.
However, no changes will come into operation before 2017 and Sanger said many would argue that the review 'needs to be both accelerated and more fundamental'.
This view was echoed by David McCorquodale, head of retail at KPMG, who said there should be an 'urgent re-think and overhaul of the business rates system, which is simply no longer fit for purpose. Only a full top to toe review will deliver a long term solution'.
'Today's capping of business rates may seem welcome but it is not enough. Rates have become one of the retail industry's biggest costs and biggest burdens, outpacing rents, revenue growth and curtailing the amount retailers are able to invest back into their business. A cap rather than a freeze still means a rise in costs,' McCorquodale said.
Support for reform of business rates is building momentum as it is widely seen as a major burden on retailers.
Richard Rose, a tax partner at BDO, said: 'Today's announcement fails to get to grips with the sector's underlying problems. What is needed is an immediate wholesale review of the business rates system to create a level playing field for all and to take a positive step towards reviving high streets and boosting retail jobs across the country. Anything less is just tinkering around the edges.'
