Firms handed £2.3bn reprieve in business rates indexation change
UK firms have been granted a £2.3 billion reprieve on controversial business rates as part of a string of tax changes the Chancellor said proved the Government was "listening to concerns".
Philip Hammond has brought forward plans to swap the way it determines the annual increase of business rates from the higher Retail Price Index (RPI) measure of inflation to the lower Consumer Price Index (CPI).
Those changes, which were set to be implemented by 2020, will now take effect in April 2018, resulting in a 3% rise in business rates rather than a 4% increase had it been indexed to RPI.
Mr Hammond said the move would save businesses a total of £2.3 billion over five years.
"We have listened to concerns about the potential costs of the annual uprating of business rates in April and today I will accept the representation of the British Chambers of Commerce, CBI and other business organisations and bring forward the planned switch from RPI to CPI by two years, to April 2018," the Chancellor said in his Budget speech.
But ratings advisory firm Altus Group said it was not enough to support struggling businesses, with industry advocates having called for a rates freeze.
"Even with rates rises limited next year to September's CPI rate of 3%, this still drives revenue receipts up by £884 million, with the struggling retail sector shouldering £226 million of that rise," Alex Probyn, president of the UK business rates division of Altus Group, said.
"A switch to CPI brings a concession in tax rises of about £266 million, but this is a pretty cheap giveaway by Government. The Chancellor should have gone further.
"A rates liability freeze was the minimum that business needed."
In a move to support "thousands of small pubs", Mr Hammond said he would also extend a £1,000 discount on their business rates - for those with a rateable value of less than £100,000 - for another year until March 2019.
Firms across the country were left reeling following the revaluation of business rates earlier this year, which accounted for property price changes over the last seven years.
But Mr Hammond revealed plans to reduce the period between revaluations in a move that is expected to further ease pressure on UK firms.
"I have heard the concerns about the five-yearly revaluation system. Shorter revaluation periods will reduce the size of changes in valuations.
"So I can announce today that after the next revaluation, future revaluations will take place every three years. This Conservative Government is listening to our small businesses."
The Chancellor has also taken aim at the newly introduced "staircase tax", which was the contentious result of a Supreme Court ruling on the definition of a single business space.
It means offices covering multiple floors in a building would be billed separately if their corridors or staircases are communal, rather than private to the business.
The ruling sparked a backlash from industry groups including the Federation of Small Businesses, which warned that some firms could be set for a substantial hike in their bills of up to 5,000%.
But Mr Hammond has pledged to change the law, allowing businesses impacted by the Supreme Court ruling to have their original bill reinstated and backdated, if they choose.