Business rate rise to net £1bn

MINISTERS are facing a backlash from companies after official figures suggested that the Government will raise an extra £1 billion in business rates next year.

The Treasury has insisted that a controversial revaluation of business rates will be “revenue-neutral” after businesses complained that high-street shops are in line for enormous rises.

But official forecasts published yesterday show that tax revenues are expected to rise sharply after the reforms are introduced in April.

The Government is expecting to take in £25.5 billion from the charges in 2017-18, which is up from £24.5 billion last year.

The forecasts suggest that appeals against the changes could reduce revenue by £1.3 billion, but even when taking this into account, revenues will still rise by £300 million.

Figures also show that between 2013 and the end of next year business rates will have risen by more than £3 billion.

The Government said the revaluation would not raise more – or less – tax and that the rise in revenue was the result of “growth from new construction” and “refurbishments to properties”.

Mike Cherry, national chairman of the Federation of Small Business, said: “At Budget 2016 the Government

announced the biggest-ever cut in business rates worth £6.7 billion over the next five years. This would reduce business rates with a real focus on the UK’s smaller businesses. Ministers must honour this commitment, made to FSB members and the wider UK small business community.”

Mr Cherry added: “The business rates system is increasingly unfair and outdated, with many facing arbitrary surprise hikes in their bills. It would add salt to the wound if ministers now do not deliver what they promised.”

However, David Gauke, chief secretary to the Treasury, last night accused the Government’s critics of “scaremongering”.

He said: “Nearly three quarters of businesses will actually see no change, or even a fall, in their business rates bills. The fact is that the generous reliefs we are introducing mean that 600,000 small businesses are paying no business rates at all – something we’re making permanent so they never pay these bills again.”

He added: “Whether on a town’s high street or in a rural community, we’ve also introduced £3.6 billion in support for companies affected by the business rates revaluation – a process that is making the system accurate and fair for everyone.”

Theresa May is already being urged to reconsider “penal and unfair” rises in business rates, amid warnings that some firms face being hit with a huge rise in their bills.

Under the new rates, which take effect in April and represent the first change in almost a decade, companies will receive bills that have been calculated to take into account the rise in property prices since 2008.

It means many businesses in the South East will face soaring rates, while others in areas where high street rental prices have fallen will benefit.

The changes are also likely to affect the cost of childcare, with a reported rise in rates of £118 million over five years for nurseries. Family holidays could also be affected, with higher business rates for B&Bs and holiday homes.

An analysis by The Daily Telegraph found that business rates collected by nearly 100 local authorities will rise next year, with the biggest increase in the City of London, where rates will rise by 31.2 per cent.

Over the period 2013 to 2017, business rates in four in five councils have increased.