U-turn on business rates is set to save firms £2.5BILLION

COMMUNITIES Minister Sajid Javid is set to announce a major Government U-turn this week when he scraps controversial plans to ban companies from appealing against rises in business rates.

The reversal – expected to save businesses £2.5 billion over the next five years – will heap pressure on the appeals system, which is already groaning under a backlog of 250,000 outstanding cases.

The Government has come under a sustained attack over its proposal to forbid businesses from appealing against their rates bills even if they were clearly wrong. The plans have been branded ‘illegal’ by some critics.

The Government had proposed automatically rejecting appeals as long as the bill was within a margin of error expected to be as much as 15 per cent on the grounds that this was within the range of ‘professional judgment’.

However, under joint proposals being prepared by Mr Javid’s department alongside the Treasury after a backlash from businesses, the plan will be axed.

Last month, Finance Secretary Derek Mackay bowed to pressure from businesses over the rates revaluation north of the Border.

Following an outcry, he confirmed hotels, restaurants, pubs and cafes would face an increase of no more than 12.5 per cent. Similar measures will also be extended to renewable energy projects, particularly in the North-East.

Under the UK Government’s £25 billion business rates system, firms in areas where property costs have soared have been facing huge increases.

Plans for the overhaul of the appeals process were revealed in The Mail on Sunday in November. The Government is considering ways to introduce limits on the number of appeals in order to ease the backlog of cases, some of which date back to 2010.

It had already increased the amount set aside to settle appeals by 10 per cent.

Following conversations with Government this week, Mark Rigby at ratings adviser CVS said he had been given ‘the strongest possible indication’ that the Minister had ‘taken on board the concerns of business’.

CVS has estimated the U-turn could save businesses £2.5billion over the next five years, based on the conservative assumption that the margin of error would be set at 10 per cent rather than the widely expected 15 per cent.

Mr Rigby said: ‘I believe the Secretary of State is fully committed to ensuring all firms pay fair and accurate tax without rebates being curtailed.’

CVS said the proposed changes to the appeals system would have been ‘unfair and manifestly unjust’.