The Government’s two-year deferment of the business rates revaluation to April 2017 will cost businesses in the north of England and the Midlands a staggering £2.3 billion, according to new research by Bilfinger GVA.
The comprehensive review by the leading commercial property advisor calculates what the 2015 revaluation would have looked like if it had taken place when it was originally due on 1 April 2015 and compares this to what businesses will instead have to pay over the course of the deferment.
The findings also suggest that over the same period, it will cost the East of England, South East and South West an additional £640 million, while London businesses will actually benefit by more than £1.5bn. However London businesses can expect to be hit very hard when the deferred revaluation is carried out in 2017.
Current rating liabilities are valued against the backdrop of the market in April 2008. As a result the current rating system has become badly disconnected from the economic landscape, and left business crying out for changes to create a fairer environment.
The Bilfinger GVA review, entitled April Fools’: The rating revaluation that never was, contains a number of key findings and recommendations, including:
– The deferment of the 2015 revaluation will cost business in the North of England and Midlands £2.3 billion, while saving London £1.5bn.
– The 2015 Uniform Business Rate (UBR) would have been 54.5p, with RPI increases taking it beyond the unchartered 60p barrier by year five of the valuation cycle. The UBR is currently 49.3p for financial year 2015/16.
– Bilfinger GVA forecasts that the 2017 revaluation UBR will rise to 51.2p, with rateable values (RV) 3% lower across England compared to 2010. It will be the first time for 22 years that the multiplier will not fall because of the revaluation.
– A 7.5% increase in London’s RV and higher UBR will cost London an additional £1.1bn in 2017-18.
– GVA asks the Government to commit to four year revaluations from 2017 onwards.
– Scrap downward transition adjustments for hard hit businesses from 2017 so they receive the immediate benefit from the 2017 revaluation.
– The Government must change from RPI to CPI-linked uplifts to stop the inexorable rise of this tax base.
Graham Knight, Director in Bilfinger GVA’s Business Rates team, says: “The Government has responded to growing calls across the business community for what it terms a ‘root and branch’ reform of the business rates system. However, it is important to remember that the Government is committed for any changes to be fiscally neutral, so any major reforms to the system will still create winners and losers.
“The Government is very much responsible for much of the controversy over the current system for delaying the revaluation from 2015 to 2017. Our research clearly highlights the regions and sectors that have paid the highest price for the delay.
“By switching to a CPI-linked system, committing to more frequent valuations and scrapping downward transition adjustments from 2017 for those businesses that have been hardest hit, any future Government could make huge strides towards redressing the imbalances in the system, and reducing an increasingly disproportion burden on growth and job-creating enterprise.”