Since 1990 business rates have been linked to the previous September’s Retail Prices Index figure. This is despite the fact that the relevant legislation, the Local Government Finance Act 1988 permits the adoption of a lesser amount. This policy has resulted in some big increases in the past, notably the 5.7% rates rise in 2012. There has been intense lobbying by businesses for reform including a two-year freeze on business rates. In response the Chancellor, George Osborne revealed changes to business rates in the Autumn Statement. The key amendments include:

  • A cap on the increase in business rates to 2% in 2014-15 (without the policy change it would have risen by 3.2%).
  • A discount of up to £1,000 against business rates bills for retail premises (including pubs, cafes, restaurants and charity shops) with a rateable value of up to £50,000 in 2014-15 and 2015-16.
  • Doubling the Small Business Rate Relief for a further 12 months from 1 April 2014.

According to the official statement the changes will offer support in particular to the retail sector and to smaller businesses, for whom business rates represent a high proportion of overheads. The government also announced its intention to discuss with businesses options for longer-term administrative reform of business rates post-2017.

The changes do represent a step in the right direction. However, some businesses feel that if a thorough review is delayed until 2017 the retail and other sectors will be put under considerable pressure. Indeed the administrator of Blockbuster attributed the fact that business rates amounted to 10% of its turnover as a key factor in its demise.