Business Rates Briefing - Chancellor's Autumn Statement

17 November 2022

We have been waiting with bated breath for the Chancellor’s Autumn Statement and news of how liabilities will be calculated for the 2023 Rating List. That day has arrived and there are some very important items contained within the Chancellor’s Statement, which Richard Williamson, our National Head of Rating, sets out the business rates headlines for below.

The 2023 draft Rating List in England and Wales has been published today.

England

Chancellor’s Autumn Statement

The Chancellor has been setting out a number of taxation changes that will stem from his Autumn Statement and this has included numerous announcements relating to the business rates system. I set these out below. Please note that these provisions apply to England only, but we can expect announcements from each of the devolved governments over the coming days and we will share more detail in due course, setting out where the Scottish, Welsh and Northern Irish administrations stand on 2023 related business rates matters. 

Summary

Jeremy Hunt’s statement contains the following key measures:

• 2023 Revaluation confirmed – wef 1 April 2023
• £13.6Bn support package announced to reduce the burden of business rates
• Business rates multipliers will be frozen in 2023/24 at 2022/23 levels to provide certainty – a 6% reduction than would have otherwise been the case, worth £9.3Bn
• The standard hereditament multiplier will remain at 49.9p (rather than increasing to 52.9p) and the “Large” hereditament multiplier will remain at 51.2p (rather than increasing to 54.2p)
• Online Sales Tax (OST) proposals will NOT be pursued
• An upwards transitional scheme will apply in England to cap increases in liability for 2023/24:
  - 5% “upwards cap” for “small” hereditaments (RV’s up to £20K or £28K in London)
  - 15% “upwards cap” for medium hereditaments (RV’s between £20k-£100K)
  - 30% “upwards cap” for “large” hereditaments (RV's over £100K)
• Transitional caps to be applied before any other reliefs or supplements. The usual inflationary increase – estimated by OBR at 7.1% for CPI - will NOT apply in 2023/24 but will be reintroduced (as per the 2017 List) for 2024/25 and 2025/26
• Further transitional relief in subsequent years will cap increases in liability as follows:

Hereditament Band	2023/24	2024/25	2025/26
Small (RV up to £20k or £28k in London)	5%	10%	25%
Medium (RV between £20k to £100k)	15%	25%	40%
Large (RV between £20k to £100k)	30%	40%	55%

• There will be NO downwards transitional scheme at all for the 300,000 properties with reducing rateable values – upwards Transition will be fully funded by central government and is worth £1.6Bn with downwards transition being “permanently” removed.
• Retail Hospitality and Leisure relief (RHLR) will apply again in 2023/24 and be increased from 50% to 75% but will be capped again at £110,000 per business. This is worth £2.1Bn. It is expected that the RHLR will be subject to Subsidy Control.
• 2023/24 bills will be capped for all businesses losing small business rates relief (SBRR) or rural rate relief so that the maximum increase is £600 from 1/4/2023. This is worth £500M.
• The Business Rates Improvement Relief scheme previously announced (and which would have seen 12 months 100% relief on all qualifying improvements) will be delayed until 1st April 2024 and will continue until 2028.

The biggest news for many in terms of the above announcements will be the freezing of the 2023/24 multipliers and the abolition of downwards transition – something that so many stakeholders have campaigned for, including – very strongly in our Consultation response – GL Hearn. The very welcome news is that an upwards transitional scheme will be implemented for the three years of the 2023 List, to be fully funded by the Exchequer.

For those wanting to read the full transcript of the Autumn Statement please see HERE. The key paragraphs relating to business rates measures are set out below:

Executive Summary

While taking these necessary steps, the government also recognises that businesses are facing significant inflationary pressures. The Autumn Statement sets out a package of targeted support to help with business rates costs worth £13.6 billion over the next 5 years. The business rates multipliers will be frozen in 2023-24, and upward transitional relief caps will provide support to ratepayers facing large bill increases following the revaluation. The relief for retail, hospitality and leisure sectors will be extended and increased, and there will be additional support provided for small businesses.

2.16 The government is going further to support businesses and the high street by reducing the burden of business rates, providing £13.6 billion of support for businesses over the next 5 years. This includes freezing the multipliers, increasing relief for retail, hospitality and leisure to 75%, and reforming transitional relief on the revaluation by exchequer funding the scheme and abolishing downward caps. This builds on the government’s existing commitment to reform the business rates system by delivering more frequent revaluations, which will ensure rates better reflect current market values.

5.44 Online Sales Tax (OST) - Following consultation, the government has decided not to introduce an OST, an idea put forward by certain stakeholders in the context of Business Rates reform. The government’s decision reflects concerns raised about an OST’s complexity and the risk of creating unintended distortion or unfair outcomes between different business models. A response to the OST consultation will be published shortly.

5.45 Business Rates – Overall Package - From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017. A package of targeted support worth £13.6 billion over the next 5 years will support businesses as they transition to their new bills, protect businesses from the full impact of inflation, and support our high streets. English Local Authorities will be fully compensated for the loss of income as a result of these business rates measures and will receive new burdens funding for administrative and IT costs.

5.46 Business Rates - Multiplier Freeze - The business rates multipliers will be frozen in 2023-24 at 49.9 pence and 51.2 pence, preventing them from increasing to 52.9 pence and 54.2 pence. This is a tax cut worth £9.3 billion over the next five years. This will support all ratepayers, large and small, and mean bills are 6% lower than without the freeze, before any reliefs are applied.

5.47 Business Rates - Transitional Relief Scheme - Upwards Transitional Relief will support properties by capping bill increases caused by changes in rateable values at the 2023 revaluation. This £1.6 billion of support will be funded by the Exchequer rather than by limiting bill decreases, as at previous revaluations. The ‘upward caps’ will be 5%, 15% and 30%, respectively, for small, medium, and large properties in 2023-24, and will be applied before any other reliefs or supplements. This delivers significant reform to the business rates system and responds to a key stakeholder ask. The 300,000 properties with falls in rateable values will see the full benefit of that reduction in their new business rates bill from April 2023. Over the life of the 3-year list the scheme will support around 700,000 ratepayers.

5.48 Business Rates - Retail, Hospitality and Leisure Relief - Support for eligible retail, hospitality, and leisure businesses is being extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023-24. Around 230,000 RHL properties will be eligible to receive this increased support worth £2.1 billion.

5.49 Business Rates - Supporting Small Business Scheme (SSBS) - Bill increases for the smallest businesses losing eligibility or seeing reductions in SBRR or Rural Rate Relief (RRR) will be capped at £600 per year from 1 April 2023. This is support worth over £500 million over the next 3 years and will protect over 80,000 small businesses who are losing some or all eligibility for relief. This means no small business losing eligibility for SBRR or RRR will see a bill increase of more than £50 per month in 2023-24.

5.50 Business Rates - Improvement Relief - At Autumn Budget 2021 the government announced a new improvement relief to ensure ratepayers do not see an increase in their rates for 12 months as a result of making qualifying improvements to a property they occupy. This will now be introduced from April 2024. This relief will be available until 2028, at which point the government will review the measure.

To find out more and to see how we can help reduce the burden of business rates for your business, get in touch with the team today. 

 

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