02.06.2009

Business rate is likely to cost an extra 5%

The Government has proposed 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.

Although the rise in April should not affect dealers greatly, it is still a rise that businesses could do without during these tough times.

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.

Dealers should therefore take advice to help them decipher what the changes mean for them and in some cases challenge the increase.

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

The Chancellor of the Exchequer Alistair Darling said that 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.