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Business Rates

Volume 508: debated on Wednesday 7 April 2010

The Petition of persons concerned by the increase in business rates,

Declares that with small businesses and entrepreneurs already struggling to survive in the current economic climate, a rise in business rates will have a severe impact. Notes that business rates set for April 2010 have been subject to a revaluation process based upon inflated rental values in 2008 and further notes that Northern Ireland has deferred business rate changes this year.

The Petitioners therefore request that the House of Commons calls upon the Government to stop these damaging business rate increases.

And the Petitioners remain, etc.—[Presented by Mr. David Burrowes, Official Report, 23 March 2010; Vol. 508, c. 9P.]


Observations from the Secretary of State for Communities and Local Government:

The Secretary of State for Communities and Local Government notes that the five-yearly revaluations for business rates are intended to guarantee that each one pays its fair contribution and no more. This is done by making sure that the share of the national rates bill paid by any one business reflects the changes over time in the value of their property relative to others. Overall, the amount of rates paid by businesses nationally does not increase as a result of five-yearly revaluations.

If demand rises in an area, rental values tend to increase relative to the national average and, if demand falls in an area, rental values tend to decrease relative to the national average. As these rental values form the basis of rateable values, revaluation allows each business to contribute according to the most recent information available.

The high property values in April 2008, upon which the 2010 revaluation was based, does not, thanks to the way business rates are calculated, automatically translate into higher bills. The multiplier has been reduced by 15 per cent.—taking it to its lowest level for 17 years. As a result, although some people will see their rates bill fall and others will see them rise, the system is designed to ensure the Government do not collect an extra penny from revaluation.

The postponement of revaluation in Northern Ireland is a devolved decision based on very different local circumstances made by the Northern Ireland Assembly and as such it is a matter for them. Postponing revaluation would hit hard those businesses that most need our help, such as businesses in the Midlands and industry whose relative property value has fallen since the last revaluation and therefore should pay less in rates.

In fact, over a million properties—six out of every 10 business properties—will see their business rate liability fall as a result of this revaluation. For the minority of properties whose bills increase the Government have established a £2 billion transitional relief scheme to limit the impact of these rises. This means that no business property will see its rates rise by more than 11 per cent. as a result of revaluation in 2010-11, with increases capped at no more than 3.5 per cent. for small businesses.

The transitional relief scheme is in addition to the wider support available, like discounted rates bills for small firms and deferred tax payments for others, to help businesses deal with the current economic pressures. In addition, on 24 March, the Chancellor of the Exchequer announced in the Budget that the Government will increase for one year the level of small business rate relief. This means that eligible ratepayers will pay no rates on properties with rateable values up to £6,000, with a tapered relief of between 100 per cent. and 0 per cent. for properties with rateable values between £6,001 and £12,000. The new levels of relief will be available for 12 months from 1 October 2010 to 30 September 2011.