BUSINESS RATES REVALUATION
A consultation on the transitional arrangements for the 2017 business rates revaluation has been carried out and last week a response by representatives of London Businesses and Government was put in.
This an unprecedented joint response between the Mayor for Greater London, London Councils and 37 London business organisations representing over 16,000 small, medium and large businesses from all sectors and throughout the whole of London.
The response has three distinct but interrelated elements. It is proposed that the Government should:
• Revise its transitional relief proposals to give businesses a realistic opportunity to plan for the large rate rises caused by the seven-year period since the previous revaluation.
• Consider positively mitigating proposals that will enable London businesses to generate the income to meet the rise in business costs.
• Review in the long-term the effectiveness of business rates as a way of taxing businesses.
There is a transitional relief scheme which is meant to enable businesses to manage the rate rise in a way which minimises 'surprises' and permits businesses to continue to invest for growth over the longer term. The previous three revaluations have seen a cap on annual rises of 12.5% and it was widely expected that a similar scheme would be introduced for 2017. The Government states that 'the transitional arrangements will support ratepayers by allowing them time to adjust to their new business rates bills.' It continues 'those ratepayers facing increases will see their bills capped each year at a set percentage increase due to the revaluation. Those businesses will be able to plan for their future business rates bills.'
The City of London Corporation is however concerned the arrangements are not sufficient for businesses. We fear that the proposed options do not enable businesses to plan, for two reasons. First, because the cap is set at an unexpectedly high level, particularly given the very large changes in rateable value caused by the Government’s delay in implementing the revaluation. The second reason why we do not believe the proposed options enable businesses to plan is because of the very late publication of the transitional relief proposals.
As a result we are participating in the consultation and asking Government to reconsider options. In the longer term we believe that the Government should review the appropriateness and effectiveness of the business rates system. The net burden of business rates is being shifted to an ever smaller pool of ratepayers. This is largely due to the artificially imposed constraint that the tax must raise a fixed amount of revenue. Each revaluation sees London contributing an increasingly larger proportion to the business rate total while the business rates tax base is being continually eroded across the rest of England. London will generate almost 35% of the total business rates yield in England by 2020 and, if the existing national revaluation arrangements continue and historic trends in relative rateable value growth are maintained, the GLA has predicated this share will rise to almost 60% by 2040. We believe it is unsustainable to be constantly narrowing the tax base in this way.