Mini-Budget: glaring omission on business rates

Friday’s Mini-Budget delivered some sweeping tax cuts which, according to the Institute for Fiscal Studies, are the largest since the 1970s. Surprisingly, business rates escaped any real attention, with the only mention being additional relief in designated Investment Zones.

When you consider the extent of the action being taken to cap energy costs and reduce Tax, NI and Stamp Duty, action to minimise the business rates burden seems like an obvious error.

To recap, we’re currently in the last year of the 2017 rating list, with a new list due to come into effect next April. The purpose of a revaluation is to make Rateable Values more representative of rental values and ‘Revaluation 2023’ is based on rental values at 1 April 2021. While we have some expectations around how RVs will change, the extent of the shift is unknown despite the fact that the revaluation is largely complete.

The previous two rating lists were published in draft form six months before they came into effect, so based on previous timelines we would have a clear view of the revised Rateable Values. For Revaluation 2023 however, the draft list won’t be released until December, giving a much shorter window to deal with any obvious errors or to plan for a hike in liability.

Preparation of the new rating list is so significantly advanced that the Government should have the ability to undertake accurate financial modelling allowing it to consider the impact and act accordingly. We are however still waiting for the result of consultation on Transitional Relief and there have been widespread calls for it to be scraped or significantly amended. The results of the consultation need to be concluded quickly.

The Mini-Budget also missed an opportunity to give businesses comfort on Small Business Rates Relief and Expanded Retail Discount. Occupiers of single properties in England with a 2017 RV under £12,000 pay no rates, with a sliding scale of relief between £12,000 and £15,000 RV. We expect to see substantial growth on industrial properties for the 2023 list, backed by the rental growth between 2015 and 2021, the respective valuation dates for the current and new list. The SBRR thresholds must be adjusted accordingly to avoid businesses going from 100% SBRR relief to 100% liability. Again the Government should be able to model this based on Revaluation 2023 data and act accordingly to minimise burdens.

The retail hospitality and leisure sector has benefited from varying degrees of Expanded Retail Discount since 2019, a scheme introduced as a short term fix to excessive Rateable Values in those sectors, then bolstered by Covid. Will it continue from April 2023? Again, certainty is required to allow businesses to plan for the future.

We’re now less than six months from the new rating list coming into effect and all these uncertainties play havoc with business decisions. We have a number of clients deferring decisions on expansion/relocation due and uncertainty around the 2023 onwards rates position plays a significant part in this. Known liabilities, whether that be business rates or anything else, can be factored in. Uncertainty and unknown cost can’t be and it seems counteractive to what the government is trying to achieve with this ‘Targeted Fiscal Event’ – I think Chancellor Kwarteng has missed the target and lost an opportunity to give businesses some clarity on their future costs.

The lack of anything substantive on business rates last Friday doesn’t mean that there won’t be any further announcements in due course but the government really do need to get on with it.