Samantha Jones

Government fails in its promise of business rates reform

The Government has failed to deliver its promise of business rates reform in today’s budget, says commercial property specialist Prop-Search, despite repeated calls from industry for a total overhaul of the existing system which discourages investment.

In her first Budget as Chancellor under the new Labour Government, Rachel Reeve’s announcements were desperately disappointing despite pre-election promises of business rates reform.

Samantha Jones, an Associate Director and Retail Specialist at Prop-Search, said: “Nothing significant was announced – there is to be no consultation on the current outdated system, just the production of a discussion document.”

“Whilst the new Government says it believes a fair business rates system is one in which everyone pays their share and valuations are responsive to economic reality, the previous Government had already tightened its grip on those that abused the system – through either avoidance or evasion – to reduce their bills or avoid paying rates altogether.”

Today, the Government confirmed that it will review whether the changes made to Empty Property Relief, whereby properties are artificially occupied to reset the reliefs available, had effectively reduced the financial incentive to avoid the payment of business rates.

Samantha added: “The only other review the Government is proposing for all businesses is considering whether the current rating revaluation system can be improved.”

“At present there is a two-year gap between the date a property is valued – the Advance Valuation Date (AVD) – and the date the new valuation list comes into effect.  This coupled with the three-year gap between revaluations means that by the time the three-year valuation list ends, five years will have passed since the AVD.”

Today’s Budget has also bought mixed news for the High Street.

The Retail, Hospitality & Leisure Relief of 75% – which was implemented during COVID – will drop to 40% from April of next year, despite the Chancellor’s stated commitment to lowering business rates for high street retailers in order to “level the playing field” with their online competitors.  According to the Government, the magnitude of the current relief creates significant fiscal pressure, which is unsustainable when trying to plug the spending back hole.

“But whilst the Government takes with one hand it gives with another”, said Samantha.  “The Government has announced that it intends to introduce permanently lower rates for retail, hospitality and leisure properties from 2026-27 by introducing a lower multiplier used to calculate the amount of business rates payable.”

The intention is to introduce permanently lower multipliers for retail, hospitality and leisure properties with Rateable Values under £500,000.  This will be sustainably funded by a higher multiplier on properties with Rateable Values of £500,000 and above, which includes the majority of large distribution warehouses including those used by online giants.

 

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