Business Rates Bonanza as Hammond Finally Answers Calls for Reform
Chancellor’s big business rates giveaway includes three-yearly revaluations from 2022
Those in commerce and property who take a keen interest in business rates could not believe what they heard! Some 45 minutes into his budget speech, Phillip Hammond made a series of pledges that in one fell swoop, pretty much answered all of the calls for reform that businesses and other stakeholders have been crying out for for years.
BNP Paribas Real Estate has been a supporter of more frequent revaluations and we have made such representations to government. Three-yearly property revaluations (instead of the current five-yearly pattern, that itself was extended to seven) will prevent large swings in premises’ rateable values that in turn will make businesses’ liabilities more predictable. This is a welcome move. While the government had pledged more frequent revaluations in the small print of earlier Budgets, this change was expected to be confirmed in later years.
A complete surprise was his pledge concerning the ‘staircase tax’. The 2015 Supreme Court ruling in ‘Mazars’ directs that (in nearly all cases) buildings that are occupied by two or more businesses must be rated in as many parts as are capable of being let. The consequence of this pledge – which requires new legislation and therefore cross-party support – is that businesses with large takes of adjoining space in multi-storey office blocks could have their rates bills reinstated to the pre-Mazars practice, of having a single rates bill that may contain some form of discount for economies of scale. We look forward to receiving more detail.
An expected pledge is that the annual percentage adjustment in rates bills would switch from RPI to CPI from 1 April 2018, a move that the Chancellor suggested would save £2.3bn over five years. This reform was expected to be introduced in 2020.
Pub relief, A £1,000 discount that may apply to premises with a rateable value of less than £100,000, has been extended for a further year, although this is criteria based and subject to stringent state aid rules.
In all, this is the most significant budget for business rates since the 1980s, prior to the legislative change in 1988 that incorporated the Poll Tax. Businesses’ and lobbyists’ beleaguered cries for change have been not only been heard, but acted upon.