The UK draft rating list (published in September 2016) shows a dramatic increase in the rates to be paid by businesses in London from April 2017 and a decrease in rates for the rest of the UK. There was disappointment following last month’s Autumn Statement which did nothing to deal with concern about these imminent changes.
One of the worst hit sectors will be retail. The most extreme changes will be seen in central London, where Regent Street is set to experience an 87% increase in rates and Brixton will see a 128% increase. In contrast, parts of Blackpool and Bolton could be celebrating a drop of up to 56% in rates.
Business rates are a tax on commercial property and are calculated as a proportion of the value of the building. Every five years the underlying value of the property is assessed to determine their rateable value.
However, the underlying property values that are used are taken from two years previously. The last business rates were set in 2010 and were based on property values in 2008. The last revaluation should have been in 2015 but was delayed by the government who wanted to avoid sharp changes in business rate bills.
The new rates coming into effect on 1 April 2017 will be based on property values from 2015, although the economy has certainly moved on since this date. There have been fluctuating changes in values for London and the South East since business rates were last set and prices have generally fallen in other parts of the UK.
Where properties are affected by a significant change, there will be transitional arrangements in place to limit how much bills are increased over the next five years. Businesses that will benefit from lower property rates will also see the changes introduced in stages.
Local authorities currently keep 50% of locally collected business rates and the remaining 50% goes into a central government pool and redistributed back to councils according to need.
The government is working towards allowing local authorities to keep 100% of rates and giving them the freedom to set their own rates. Some argue this devolution of power will mean the richer boroughs get richer and the poorer boroughs get poorer, but this will remain to be seen.