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Chancellor has "missed opportunity" to revamp business rates alongside relief package, expert says

Out-Law News | 05 Dec 2013 | 3:48 pm | 2 min. read

The package of business rate reliefs and discounts announced by the Chancellor of the Exchequer will give struggling retailers a much-needed boost, but an in-depth review of the rates system is needed, an expert has said.

Tom Johnson of Pinsent Masons, the law firm behind Out-Law.com, said that George Osborne had "passed up the chance to revamp the rates system" and "underline the Government's commitment to the growth agenda" as he announced a range of business rate mitigation measures as part of his Autumn Statement.

"That particular can gets kicked down the road again until after the next election," Johnson, a retail law expert, said.

"The measures announced by George Osborne today go some way to ease the burden of business rates on the UK's retailers. A discount of £1,000 off the rates bill for businesses occupying premises with a rateable value up to £50,000; the introduction of reoccupation relief in relation to vacant premises; the extension of Small Business Rate Relief; and the cap - not freeze, unfortunately - of 2% on next year's rates increase will all assist with the hard-hit high street," he said.

The Chancellor also announced that businesses would be given the opportunity to pay their rates in 12 monthly instalments, rather than 10 installments.

Business rates are charged on most non-domestic premises including shops, offices, warehouses and factories and form the third biggest outgoing for small businesses after rent and staff costs. Retailers have repeatedly called on the Government to re-examine the effect of business rates on their businesses, with some saying the regime disadvantages traditional shop owners compared to their online retail counterparts.

Rates are based on the rateable value of the business premises, which is set by the Valuation Office. This valuation is used by the local authority to calculate how much the occupier of that property should pay. Revaluations usually take place every five years; however, last year the Government announced that the next revaluation exercise would be postponed for two years, until 2017. This was done to provide "tax stability" to shops and businesses, it said, although industry groups reacted angrily to the decision.

In his speech, Osborne said that he had "listened to the small business groups" in relation to rates, and would extend the Small Business Rate Relief scheme until 2015. This was due to expire in April 2014, having already been extended as part of last year's Autumn Statement. The Government would also "relax the rules that discourage these firms from expanding and opening extra premises", by allowing them to claim the relief for an additional year when taking on a new property that took them above the threshold for the scheme, he said.

From next April, the annual inflation-based increase to business rates will be capped at 2%, rather than rising by the expected 3.2%, Osborne said. In addition, retail businesses in England with a rateable value of up to £50,000 will be entitled to a £1,000 discount on their business rate bills for the next two years, he said. The discount will also apply to pubs, cafes, restaurants and charity shops, and further guidance will be published on how it will be applied, according to the Autumn Statement.

The Government will also introduce a 'temporary reoccupation relief' from April 2014, the Chancellor said. This will give new occupants of previously empty retail premises a 50% discount on business rates for 18 months, provided that they move into the premises on or before 31 March 2016, according to the Autumn Statement.

In his speech, Osborne said that local retailers had found the recession "especially hard", as it had "coincided with a rising challenge from the internet that is only getting stronger".

"With Small Business Saturday this weekend, I want the government to do all it can to help them," he said.