Government shows its hand on transitional relief plans

The Government has released a summary of its transitional arrangements consultation for the 2017 business rates’ revaluation.

Two options were on the table and there were 137 responses from across the country, the majority coming from ratepayers themselves with a healthy sprinkling of agents, LAs and other interested bodies.

Interestingly, of the two options neither could muster support of more than 24% in favour – option 1 could only scrape 10%; a rather damning score for the Government mandarin who came up with that proposal.

Having studied both, there really was no clear winner for the ratepayers. Option 1 offered more protection to large ratepayers than option 2 but fewer reductions for medium businesses.

The main reason given for not supporting option 1 (especially amongst ratepayers) was that it didn’t provide enough help for large businesses facing increases. Almost half of all responses said the cap on increases in option 1 was too high. Almost a quarter of respondents rejected option 1 on the grounds that it didn’t allow medium businesses to see their reductions fast enough.

Option 2 allows medium properties to see their reductions come through faster than option 1 but has a higher cap on increases for large properties.

This proved slightly more popular with 24% in favour, and more support this time from LAs (75% support from this sector).  However, a whopping 92% of ratepayers were against it.

The principal opposition to option 2 was that it didn’t provide enough help for large businesses facing increases. Almost all of those who supported option 2 did so because it allows medium businesses benefitting from the revaluation to see their gains faster.

Many respondents suggested that the practice of capping reductions in bills at the revaluation should be scrapped and instead fund transitional relief through either a supplement on the multiplier or from general taxation. Some suggested higher or different rateable value thresholds for different locations or sectors. Others said that transitional relief should be abolished. A few respondents also re-stated their support for more frequent revaluations.

The Government stated it was set on supporting SMEs more than big business and so “found it is necessary for the 2017 revaluation to provide less relief for large businesses than in 2010.  However, based upon the latest data from the Valuation Office Agency, we are able to provide slightly more support than offered at consultation.”

The end result?

The transitional relief scheme will be worth £3.6bn over five years. For those ratepayers facing increases, London will benefit more than anywhere else in the country from the scheme. In total, over 140,000 London properties will attract almost a third of the available transitional relief available (over £1bn collectively) over the life of the scheme.  Around 100,000 are classed as small properties.

For the full summary, table and appendix see here: 2017 Transitional Relief Consultation Response