Today, the Chancellor announced that he would allow businesses to defer (or up to two years) part of the planned 5% increase in business rates.
This is welcome news. Businesses were faced with a perfect storm on business rates: a 5% increase in the rate, the restriction of empty property relief, revaluing properties based on their prices at the peak of the property boom, and the introduction of the 2p supplementary business rate.
Today's announcement only addresses the 5% increase in the business rates they pay to local authorities. The amount of business rates companies pay is determined by the value of the property (called the rateable value) and the 'business rate multiplier', which is linked to RPI inflation in September of each year.
But because rising oil and commodity prices pushed RPI inflation to 5% businesses were faced with 5% increase in their business rates from 1 April 2009 (that's tomorrow!).
EEF have been calling for business rates to be frozen...the commodity boom pushed RPI up last year and the economic bust will drag it down this year (we're forecasting RPI inflation to be -3.4%!). So rather than subject manufacturers to this see-saw in business rates, we thought a simple freeze would provide businesses with the predictibility they needed while not permanently eroding the health of the public finances.
In the end, the Treasury have agreed that a 5% increase in business taxes in a recession is a bad idea and that they needed to smooth out the business rates increase, while maintaining a degree of predictability. So they are allowing businesses the option of defering the majority of the increase in business rates.
Businesses will have to pay 2% increase this year and can choose to pay the other 3% in 2010-11 or 2011-12, by which time, their bottom lines will have hopefully improved. But the Treasury have also kept the link to RPI this year and next, providing a bit of predictability over future changes.
All welcome news, but what about movement on restoring empty property relief? Or on the revaluation?