Following a two-year year delay to avoid a clash with the 2015 General Election, business rates in England are set to change on 1 April 2017. By law, they cannot raise extra money for the government and, although the amendments are designed to reflect changes in property values, there has been a media stir over the impact on SMEs.
Tracking rate shifts
The revaluation of business premises happens every five years, although the delay means seven years have elapsed since the last round. Because the new prices will reflect changes in the average annual rent the premises could command (the rateable value), many businesses are likely to see a significant difference.
In particular, SMEs in London and the South East can probably expect increases. According to the FSB, 74% of small businesses in the capital regard the new rates as the biggest issue facing them. Chief Secretary to the Treasury David Gauke MP, however, argues that there will be more businesses in England benefiting from the changes than losing out, so SMEs should look for local announcements to find out how they’re affected.
Regular change, irregular responses
The revaluation may be a regular occurrence, but there is fierce debate over the recently announced changes; partially due to the geographic imbalance it will put on rates following the sharp rises in rateable values in the South-East, and partially in response to a debatable definition of 'not raising extra money'.
A study by Gerald Eve, for example, found that rates will increase in 191 areas and fall in only 135, while some figures claim the government will earn an extra £1bn from the changes.
In the short term, businesses must plan ahead to take these changes in their stride. This means factoring the new rates into forecasts, making necessary changes to billing and pricing and ensuring that invoicing and payment collection systems are robust.
Over the long term, SMEs may also need to adapt to respond to bigger changes that are being mooted in response to the debate over these most recent amendments. Among those suggested are more frequent revaluations and allowing businesses to appeal unfair adjustments to business rates.
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