Business Rates Briefing - Chancellor's Autumn Budget

Following the Autumn Budget announcement and Spending Review earlier this afternoon, Richard Williamson, GL Hearn’s National Head of Rating, looks at the business rates headlines.

This afternoon, the Chancellor of the Exchequer firmly shut the door on the abolition of business rates, referring to the Labour party’s conference announcement as 'irresponsible' and alluding to the importance of £25bn being delivered to HM Treasury.

The five key announcements today confirm

1. Business rates will be retained as a tax but reformed so that it will be fairer and timelier; with a new three yearly revaluation period confirmed for England from 1 April 2023

2. Two new investment reliefs will be introduced in England:

• A Green investment relief will be introduced in respect of investment in eligible green technologies such as solar panels and other renewable energy generation P&M and will be worth £750m pa. This is to support the decarbonisation of non-domestic buildings.
• A new property investment relief as recommended by the CBI and BRC to be introduced from 1 April 2023 such that a 12-month relief at 100% will apply to all improvements carried out to properties. This sounds very similar to the Business Growth Accelerator relief already applicable in Scotland and will be welcome news for those planning on carrying out improvements to their premises.

3. The Inflationary increase of 3.1% in CPI will NOT be applied in England therefore there will be no inflationary increase to business rates bills in 2022/23. This cancellation of the multiplier increase means that multipliers will remain as per 2021/22. We have not yet had any confirmation of similar moves by the Welsh or Scottish governments but given an increase in funding under the Barnett formula as announced by the Chancellor we fully expect them to follow suit. If they do, we expect multipliers to remain as follows for 2022/23 as follows:

In England, large properties subject to the small business rates supplement will have the multiplier frozen at £0.512.

In his speech the Chancellor referenced this 'freeze' in multiplier being worth £4.6bn to business over five years.

The Chancellor has announced a further extension to the Expanded Retail Discount scheme for 2022/23 to cover retail, leisure, and hospitality premises. This will apply a 50% discount to the annual rates bill up to a cap of £110,000. We await details of the scheme as to whether it will follow existing eligibility criteria, whether the cap will apply at a property or business level and whether there will be any wider subsidy controls applicable. The Chancellor announced this as worth £1.7bn. We expect this relief to be available to those businesses that wish to claim it as per the relief scheme in 2021/22 rather than an automatic award.

Not overtly publicised, but buried within the government budget publication, is that they intend to extend transitional relief for small and medium-sized businesses, and the supporting small business scheme, for 1 year (i.e., up to 31 March 2023). This will restrict bill increases to 15% for small properties (up to a rateable value of £20,000 or £28,000 in Greater London) and 25% for medium properties (up to a rateable value of £100,000), subject to subsidy control limits. The details of this scheme are yet to be seen.

In announcing the overall package of reliefs and reforms to be worth some £7bn overall, the Chancellor described it as being the largest reduction in business rates revenues announced in over 30 years.

Whilst we have not yet seen the government’s Fundamental Review of Business Rates response (we will provide a further briefing on this as soon as possible), and some longer-term fundamental reforms may be contained within that document, today’s Budget will nevertheless come as a disappointment to many businesses hoping for more significant, immediate reform. The current rate of tax will largely remain as-is albeit will at least not increase next year and there are some benefits for qualifying businesses in the retail, hospitality, and leisure sectors. But this will not deliver the significant reduction in business rates called for by many.

The Chancellor in his speech did make a passing reference to the long called for online sales tax in saying: “The government will also continue to explore the arguments for and against a UK-wide Online Sales Tax, the revenue from which would be used to reduce business rates for retailers with properties in England and with the block grants of the Devolved Administrations increased in the usual way. The government will publish a consultation shortly.”

The Chancellor speech also confirmed that “local authorities will be fully compensated for all measures announced in the review.”

Finally, although not referenced more widely the Chancellor also confirmed further funding for the Valuation Office Agency (VOA) to the tune of £80m to support the next Revaluation in England and their annual budget will be increased to £170m by 2024/25 – essentially giving the VOA some £500m over the next three years.

Richard Williamson

National Head of Rating

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