Economy and Infrastructure

Councils handed £300m business rates relief for ‘individual hard cases’

Local authorities will be handed funding to support £300m of discretionary business rates relief, chancellor Philip Hammond has revealed in today’s Spring Budget as part of a string of property tax announcements.

Councils will be able to use the money to provide support to “individual hard cases” in their local areas, a move welcomed by the LGA, which reiterated that it has long called for the freedom for councils to set discounts and reliefs locally.

Hammond, who argued he had “listened to the concerns raised by colleagues and businesses” about the potential effects of the April 2017 business rates revaluation, insisted that the tax raised £25bn per year – all of which will be going to councils by 2020, meaning it cannot be abolished “as some have suggested”.

“But, it is certainly true, in the medium term, that we have to find a better way of taxing the digital part of the economy,” added the chancellor, speaking at the jam-packed Commons. “The part that does not use bricks and mortar.

“But in the meantime, there is scope to reform the revaluation process, making it smoother and more frequent, to avoid the dramatic increases that the present system can deliver. We will set out our preferred approach in due course and will consult on it before the next revaluation is due.”

While the revaluation itself is “by law fiscally neutral”, he admitted that it had “undoubtedly raised some hard cases, especially for those businesses coming out of small business relief”.

To address these concerns, the chancellor revealed three measures that will apply to the national business rates system in England.

First, any business coming out of small business rate relief will benefit from an additional cap, and no small business losing rate relief will see their bill increase next year by more than £50 a month; secondly, 90% of local pubs will get a £1,000 discount on their business rates bills this year; and lastly, councils will receive a £300m fund to decide which business should be given relief in their areas.

The fund will be allocated “by formula” and further details will be set out in due course.

“Taken together, this is a further £435m cut in business rates, targeted at those small businesses facing the biggest increases, protecting our pubs, and giving local authorities the resource to respond flexibly to local circumstances,” said Hammond.

Importantly, the Budget document confirmed that local government will be fully compensated for the loss of income as a result of these measures.

But Claire Kober, chair of the LGA's Resources Board, said that while the measures will not lead to any increase or reduction in funding, there is still “a risk that some councils will be left out of pocket because of delays to billing caused by the lack of certainty about relief over recent weeks”.

“It is important that the government reimburses them for any loss of income or extra costs incurred as a result,” she added. “Councils do not set business rates but any likely rise in appeals as a result of this latest revaluation will pose a risk to the funding of already-stretched local services.

“Local government will retain more of its business rates income by 2020 and could become liable for 100 per cent of refunds. This means a transparent and fair system of valuation and appeals is vital to provide greater certainty of cost and income to businesses and allow councils to release the money currently put aside to cover the risk of appeals to invest in vital local services.”

Today’s announcements closely follow Sajid Javid’s confirmation last year that London, Greater Manchester and Liverpool City Region have all reached agreement on their 100% business rates pilots – but GM has since admitted that its pilot is “less ambitious in scope” than originally planned.