Government fails to act on business rates in mini budget
Chancellor Kwasi Kwarteng abolished the top rate of income tax for the highest earners as he spent tens of billions of pounds in a bid to drive up growth to ease the cost of living crisis.
In a so-called mini-budget axing the cap on bankers’ bonuses and adding restrictions to the welfare system, he argued on Friday that tax cuts are “central to solving the riddle of growth”. By terming it a “fiscal event” rather than a full budget, Kwarteng avoided the immediate scrutiny and forecasts of the Office for Budget Responsibility
However, leading business rates consultants have argued that the Government failed to address important issues including business rates.
They argued that if the Government really wanted to simplify the tax system, "it would remove any planned implementation of phased downwards transition in the next revaluation" – otherwise this "will stifle recovery in the high street and hinder any levelling up agenda."
John Webber, Head of Business Rates at Colliers, said: “It’s disappointing that while today’s “tax cutting“ Mini Budget addressed issues such as income tax, corporation tax, NI and stamp duty, the “elephant in the room”, business rates was largely ignored, despite the impact that ultra-high rates bills have had on businesses in recent years.”
Business rates is one of the highest outgoings for occupiers of property. The tax raises around £32 billion a year gross and with rates rising in line with CPI inflation levels for September, predicted to be around 10%, this could potentially add a further £3 billion to the tax bill if nothing is done.
With just six months to go before the next revaluation, businesses have no confirmation regarding what their rateable values will be, what the multiplier will be nor how the government will response to its summer consultation on transitional relief.
In its election manifesto the Conservative government promised it would reduce business rates for those in the beleaguered retail and hospitality sectors. Now reliefs have come to an end, it is feared that the government may implement a downwards transition scheme following the 2023 Revaluation, delaying the impact of any rental falls on business rates bills.
Such a scheme would mean any business rate reductions would not be seen immediately but would be spread over several years.
Webber continued: “Retailers and other high street operators will be now considering their business plans now for next year and looking closely at their future business rates liabilities. The Chancellor has said he is simplifying the tax system – in which case he should simplify business rates- one of the most complicated taxes in the UK today. He can start this by providing reassurance that rates bills next year will immediately reflect the lower rents we are seeing in the market now -providing incentives for businesses to keep or expand space and for property investors to invest in the sector across the UK.
“Without this reassurance any “levelling up agenda” will be meaningless. And the high street unlikely to get back on its feet.
“In terms of those whose rates bills are likely to go up, such as those businesses in the industrial or distribution sector and some in the offices sector, we also think that given the current pressures from spiralling costs and wage growth, that no business should have to pay more than a 15% rise including inflation. For smaller and medium sized businesses, these increases should be limited to no more than 5/10% including inflation.
“It’s all very well giving reassurance over high energy bills and other taxes, but all this will be meaningless if business rates are allowed to soar. We are disappointed the Chancellor did not mention this in his Statement today and hope in the next few weeks he will address this issue.”