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Business rate is likely to cost an extra 5%

The Government is proposing a 5% increase in business rates from April 1.

Retailers have been protected from big jumps in their business rates by a “transitional relief” system, which ensures increases are phased in over a number of years, but this is being removed on March 31, meaning businesses which have benefited from this previously could face much larger increases than 5%.

Next April, all commercial properties in the UK will be revalued, and rates going forward will be based on these new valuations.

Retailers argue the revaluation will be based on rental levels in April 2008, a time when the property market was buoyant. Again, they argue that this is unfair as the property market has declined since then.

Alan Watson, rates partner at property consultants
Rapleys, said: “Most businesses will see rates go up by 5% in April.”

He is advising dealers to ask advice from their property consultants to help them decipher what the changes mean for them and in some cases challenge the increase.

He said: “It’s a very complicated and dusty subject. The best thing dealers can do is seek expert advice on what the changes mean for their business.

“If dealers haven’t already done so it is still not too late to challenge their rating assessments back to 2005.”

Watson doesn’t think the rise will be enough to push dealers over the edge: “I wouldn’t go as far as saying it would be the final nail in the coffin, but it’s a rise businesses could do without when times are tough.”

In a letter to Retail Week magazine, Chancellor of the Exchequer Alistair Darling said there were no plans for the Government to amend the rate rise. Doing so would cost the economy £1 billion.

He said: “Revaluation does not, in itself, raise extra revenue. It simply redistributes the tax to reflect changes in the property market across the country.”

But in the longer term he said he would be willing to consider changing the business rates system to make it less vulnerable to fluctuations in the property market.

What is revaluation?

A revaluation, or reassessment, of all rateable values is carried out by the Valuation Office Agency every five years to ensure they are kept up to date and reflect changes in the
property market. The previous revaluation came into effect on April 1, 2005.

Transitional relief is a Government scheme which ensures that large increases or decreases in rates bills due to the revaluation are phased in gradually.

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