BUDGET: Rates sweetener for small business welcomed
Tax and business rates experts broadly welcomed changes but warned that further detail has yet to emerge about implementation of new regimes.
Mike Flecknoe, senior director in the rating team at Cushman & Wakefield: “The Chancellor’s budget announcement concerning the extension of small business rates relief at 100% for properties up to a rateable value of £12,000 and tapered relief to a rateable value of £15,000 from 2017 will be greatly welcomed by SMEs. It is genuinely helpful for many small businesses across England.
“Similarly the increase of rateable value threshold to £51,000 where the lower rates multiplier will be applied will be welcomed by everybody. However, assuming the Chancellor will want the effects to be fiscally neutral, it will be interesting to see if the small business rate relief premium paid by large businesses will be increased to pay for the giveaway.
“Larger ratepayers will be pleased with the announcement that consumer price index (CPI) will be used from 2020 to determine the annual change of rates liability between revaluation – this is something long campaigned for by the likes of CBI.”
Jane Parry, managing partner & head of tax at chartered accountancy, business advisory and wealth management group, PM+M: “With the EU Referendum only months away, it wasn’t much of surprise that this Budget was relatively non-eventful as far as middle England is concerned, with the Chancellor obviously keen to not offend or rile either side of the divide.
“In our view, this Budget has certainly made things more complicated for business owners; especially if you consider the changes made to dividends last year and coming into effect in April.
“Changes to Corporation Tax were widely expected. The Chancellor is trying to tread the fine line between making the UK attractive as a base for global businesses whilst making sure that those businesses actually pay a fair amount of tax in the UK. A range of measures to do this, along with a further planned reduction in the rate of corporation tax to 17% by 2020 should go a long way towards that. It will also be interesting to see how the changes will affect medium sized companies over the coming years, as that remains unclear and there is a danger that the reduced tax rate becomes outweighed by the burden of ever increasing complexity of the tax compliance burden for those businesses.
“The devolution of power to local government has been a cornerstone of Conservative policy for a while. George Osborne’s announcement that local authorities will be responsible for collecting rates but not setting them seems somewhat strange; especially when you look at the challenges around local fundraising including a potential drain of young talent to London/the South East and an ageing legacy population that will need to be paid for.”
Adam Burke, director of rating at Colliers International: “It’s only when rateable values are published in September 2016 that will we know whether businesses will be better off. It is too early to say whether the move to CPI and changes to Small Business Rates Relief are going to offer the actual reductions Osborne claims.
“Today’s announcement is a clear admission that delaying the revaluation was a mistake. Colliers’ Manifesto for Business Rates Reform called for Government to ‘act now to avoid paying later’ with three-yearly revaluations so that this tax is properly linked to values.
“Pilots for 100% retention of business rates for Liverpool, Manchester and London will sharpen minds. But we do not want a two tier system with wildly different multipliers.”
Mark Henderson, senior director in the statutory valuations team at Cushman & Wakefield: “The biggest business rates news in today’s Budget wasn’t mentioned in the Chancellor’s speech but it could lead to big changes for ratepayers across the country. The government has confirmed an intention to move to more regular revaluations, at least one every three years, with further information expected to be published later this month.
“This could be the first step in fixing what is seen as one of the biggest problems with the current system, being that it normally doesn’t account for changes in market conditions for five years. Shorter revaluations will redistribute the burden of the tax more regularly, ensuring a fairer distribution amongst ratepayers, something that businesses across the country will welcome.
“The proposed change does raise the question of how the under-resourced Valuation Office Agency will be able to undertake more regular revaluations.”
Mark Rawstron, regional senior director, Bilfinger GVA: “1% stamp duty rise on commercial property just shows the Chancellor really does not have clue about commercial property. He thinks he is taxing a sector which can afford it but what about the effect on property values in people’s pension funds, he’s just wiped hundreds of millions off the man in the streets’ pension pots. Clueless.”
Bill Chandler, legal director, Hill Dickinson: “As was announced last year, and in what is seen as yet another attack on buy-to-let through tax, from 1 April 2016 higher rates of SDLT will be charged on purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3% above the current SDLT rates. Properties over £1.5m will be subject to a top slice rate of 15% on any of the purchase price in excess of that amount. The measures will also catch the situation where the purchase is a second dwelling for only one of the purchasers. All companies purchasing dwellings will be subject to this increased rate. There are exemptions from this including purchases under £40,000, caravans, mobile homes and houseboats.
“For commercial property there will be an increase in rates with effect from 17 March. SDLT will be applied on the “slice” basis (as is currently the case for residential property) which may benefit cheaper non-residential purchases, and there will be a new top rate of 5%. There will also be a 1% increase for purchasers of new leases where the net present value of the rent is in excess of £5m.”