The Chancellor’s failure to Freeze the Multiplier for next year will mean businesses likely to see 5% increase in Business Rates Bills in April 2024, says property and investment experts Colliers.
John Webber, Head of Business Rates at Colliers comments, “The Government’s lack of comment on Business Rates in its Budget today is desperately disappointing- with no reassurance that it has engaged with the industry -despite the fact the new 2023 Revaluation list becomes live in two weeks’ time.”
Colliers has long been campaigning for business rates reform on the grounds that the current system which provides £28 billion (net) for local authority funding is not fit for purpose, overall penalises the retail and hospitality sectors and deters businesses from expanding and investing.
Although the Chancellor announced today that some local authorities would be able to retain their business rates to decide their use and that there would be reliefs in the new Investment zones, Webber brands these measures as irrelevant. “Business rates retentions are often a hospital pass- the local authorities are given more authority to spend funds raised- but the amount of money raised never fills the gap between what is raised and what is needed. Sometimes retention can be a real negative to the local authority with the impact of appeals and the risk of losses.”
Webber also points out that the Chancellor said nothing about freezing the multiplier next year 2024/25. Although the Chancellor is predicting inflation to be 2.9% by the end of the year, business rates rises are decided on CPI levels at the end of September. These are still likely to be around 5%- that means retail and hospitality businesses will most likely be seeing a 5% rise in their rates bills in April 2024.
In addition none of the following matters, for which Colliers had been campaigning, have come to fruition:
• Reduce The Multiplier (the UBR used to calculate rate bills) to around 34 p in the £.
• Extend Retail Reliefs Post 2024
• Reform of the Sticking Plaster Reliefs System and Remove Business Rates Deserts
• Extend Empty Property Rates Relief to Twelve Months and to Other Sectors
• Introduce Annual Revaluations
• Review Plant and Machinery
• Improve Transparency from the VOA
• Reform Unfriendly and Ill-Equipped Appeal System
• Address Rogue Rating Advisors by Regulating the Ratings Industry
John Webber adds
“The Chancellor spoke of creating a tax regime pro-business, that would be the envy of Europe. Yet the failure to reduce the multiplier fundamentally means business rates for retail and other sectors will rise from 2024 with inflation. This is the first time a new list will start with a multiplier over 50p. Nowhere else in Europe do businesses pay half the rental of their premises in property taxes and at current levels this is unsustainable and deters new investment in businesses, despite the Chancellor’s claims.
This is a damning indictment for the Conservative Government who have failed their manifesto promise to reduce this tax.”
This year’s list will show a general 7.1% increase in rateable value. And this is just the start. According to the OBR report the Government is forecasting that income from business rates will rise to nearly £36 billion by 2027/28 (from £28.5 billion in 2022/23), which appears contrary to the Conservatives’ manifesto pledge: “To cut the burden of tax on business by reducing business rates.” The Retail and Hospitality Sectors are still in line to make a major contribution to that increase.
And now we have three yearly revaluations, the next list will begin in 2026, which means an AVD (Valuation date) of 1 April 2024. This means businesses, such as in the retail and hospitality sectors, will only have twelve months of respite on the current list, before preparing for bills to start rising again.
That’s why we needed the government to take the bull by the horns.” says Webber, “We still need is a well-managed, and transparent, business rates system, that encourages rather than punishes businesses. The lack of decisive action is desperately disappointing and will have wider implications for the overall property markets and retail and hospitality sectors.