Business Rates - Autumn Budget 2017

Contacts

Contacts
For more information please contact:

Bruce Wilson
07802 910764
bruce.wilson@glhearn.com

Phillip Hammond, Chancellor of the Exchequer, announced his Autumn Budget on 22nd November and further clarity in respect of the multiplier and Small Business Rate Relief supplement was provided on the 24th.

In summary four main announcements were made on the 22nd in respect of Business Rates:

1.  Increase the 2018 multiplier with reference to CPI (3.0%) rather than RPI (3.9%)

3. Introduce retrospective legislation to redress the “Staircase Tax”

2. One year extension to specific rate relief for public houses

4. Consultation on the introduction of three-yearly Revaluations from 2022

 

2018 Multiplier – Adopt CPI for 2018

Traditionally the rate multiplier is inflated annually with reference to the RPI figure applicable in September of the preceding year; legislation precludes an increase greater than this level although there has previously been manipulation whereby lower increases than RPI have been adopted; the figures for September 2017 are confirmed as follows:

RPI 3.9%

CPI 3.0%


In his statement the Chancellor committed to bring forward the proposed 2020 switch to CPI by two years and this will now be adopted to calculate next April’s multiplier increase. Based on this announcement (and the subsequent confirmation in respect of next year’s Small Business Rate Relief Supplement) we now anticipate the multipliers to be:

 

2017/18 Current

2018/19 Estimate*

 

17/18

SBRS

Payable

UBR 18/19

SBRS

Payable

England

£0.466p

£0.013p

£0.479p

£0.480p

£0.013p

£0.493p*

Scotland

£0.466p

£0.026p

£0.492p

£0.480p

£0.026p

£0.506p**

Wales

£0.499p

-

£0.499p

£0.514p

-

£0.514p***


* ignores additions for Crossrail, City of London or additional supplements.

** Scottish Multipliers have not yet been announced; the figures above assume a similar move to CPI. It is worth noting that the Scottish Government’s response to the Barclay review committed to reduce the SBRS element “if it became affordable” however at this stage we forecast no change.

To put the CPI decision into context, the base liability on a property with Rateable Value £100,000 will increase from £46,600 (2017) to £48,000 (2018) adopting CPI, a reduction of £400 from the previously adopted RPI calculation

The English figures remain provisional and will be confirmed at the latest on 1st March 2018 whilst Scotland and Wales are unlikely to be clarified until the New Year consequently GL Hearn have adopted a similar basis as for England as both administrations have previously followed similar policies.

Client 2018 Liability Forecast

For 2018 GL Hearn initially adopted 3.9%; although Scottish and Welsh positions are yet to be confirmed we will be running revised estimated liability reports adopting CPI 3.0% across the regions.

We are now assuming that a permanent change to CPI and consequently “year on year” growth will be lower than previously predicted. For 2018 and subsequent years GL Hearn will adopt the following inflationary growth figures:

Year

2018

2019

2020

2021

Inflation

3.00%

2.50%

2.25%

2.00%

One-Year Extension to Rates Rebate for Public Houses

The government previously granted a £1,000 rebate for public houses in England with RV less than £100,000; this will be extended by a further twelve months, subject to State Aid rules.

Redressing the “Staircase Tax”

Following the 2016 decision in the Supreme Court case ‘Mazars vs Woolway’  the VOA initiated a review of rating assessments in multi-occupied buildings; the impact of this review has been that ratepayers assessments were split into individual floors, or offices where exclusive connectivity did not exist, ie access between them was via common areas. 

Valuing “smaller” offices the VOA generally adopted an increased value and a direct consequence of this review has been backdated additional liability for ratepayers.

The VOA approach has been contentious with national media adopting the phrase “staircase tax”; following significant lobbying from affected parties, the Government are now taking steps to allow ratepayers to request the position be reversed and we understand this legislation is currently being drafted; this may be complex and we await any consultation or draft regulations with interest.

Consultation on the introduction of three-yearly Revaluations from 2022

The frequency of revaluations is to be increased to every three years, following the next revaluation due in 2022. DCLG advises three yearly revaluations will be delivered by the VOA, supported by regular input of information from business owners with a consultation “in the Spring”, specifically on this.

Bruce Wilson, National Head of Rating Comments

Business Rates remain a significant cost for ratepayers and, despite calls from all sectors for reform, we still wait for any genuine commitment from Government to change or reduce the burden of this tax.

The Chancellor’s Autumn Budget announced a number of measures that offer some assistance to Ratepayers however questionable real financial benefit, particularly for “large” business; a marginal slowdown in liability growth and a reversal of the highly contentious and inequitable “staircase tax”.

Of wider interest is the commitment to consult on a move to three-yearly Revaluations; this is the mechanism for rebalancing Rates and this change would make the system more responsive and reflective of market conditions. Notwithstanding this we would still highlight the unfair burden placed on ratepayers through the current scheme of Transitional “Relief” limiting true liability falls where they would otherwise expect to see reductions in their liabilities as a consequence of Revaluation.

Business Rates remains one of the highest property based taxes in the OECD; couple this with significant issues ratepayers in England face in trying to negotiate the Check Challenge Appeal process, they could be forgiven for considering business rates as a tax that is no longer fit for purpose. Structural reform is needed more than ever and we will continue to work directly with Government and through trade bodies to achieve this change.

Northern Ireland

Unrelated to the position in England, Scotland and Wales the Northern Ireland Government announced their intention to undertake a Revaluation and implement a new Rating List from April 2020 (https://www.finance-ni.gov.uk/news/work-start-non-domestic-rates-revaluation)

Undertaking this process maintains the two-year gap that currently sits between Northern Ireland and the rest of the UK following their decision not to postpone the 2015 Revaluation.

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The Chancellor’s Autumn Budget announced a number of measures that offer some assistance to Ratepayers however questionable real financial benefit, particularly for “large” business; a marginal slowdown in liability growth and a reversal of the highly contentious and inequitable “staircase tax”
Bruce Wilson
Business Rates Director, National Head of Rating

GL Hearn

Contacts
For more information please contact:

Bruce Wilson
07802 910764
bruce.wilson@glhearn.com