In the third blog in the series looking at the impact of recent changes affecting business rates from April 2024, the focus is now turned to the Spring Budget held on 6th March 2024.
Much of the attention devoted to the budget is limited to the “pantomime” that appears on TV news screens with a smattering of input from Mr and Mrs Average of Purley. To support all of the headlines is the publication of the Budget Book which contains the detail as well as other announcements that did not find their way into the Chancellor’s speech.
In that book, there was an absence of any change to the multiplier referred to in an earlier blog so many businesses will be faced with an increase of at least 6.7% (more when transitional arrangements are applied) and compare that to an inflation rate nearer 4% and wonder where the two tie up!
There was something in the Budget Book that was of interest which can be broken down into “good, bad and ugly”.
Firstly, the good.
“Eligible” film studios are in line for a 40% relief on their gross business rates for a period of ten years from 1st April 2024.
Whilst this, on the face of it will be welcomed, expectations should be tempered.
Firstly, the reduction is applied to gross business rates rather than the amount that studios have been asked to pay for 2024 after transitional relief has been applied.
Secondly, it has yet to be determined whether this relief will be considered a Subsidy and if so, what if any limitations will be applied. It is worth noting that Retail Hospitality & Leisure Relief available to many in that industry is considered a Subsidy and restricted in line with the Subsidy Control Act 2022 to £315,000 over three years.
As mentioned, this relief will be effective from 1st April 2024 and the Budget Book has recognised that this involves a re-billing exercise so has made allowance for the fact and will recompense local authorities for increased administration time and IT costs.
As with similar announcements in the past, this will be supported by more detail in the form of guidance so it will be interesting to see how this works out.
Secondly, the bad.
In 2023, the government conducted a consultation exercise on what it termed “Business Rates Avoidance and Evasion” and the results of that consultation are out now, https://www.gov.uk/government/consultations/business-rates-avoidance-and-evasion-consultation
It is interesting to see that in answer to the question,
“Would increasing the required duration of occupation during the ‘reset period’ from 6-weeks to 3- or 6-months, in your view, be effective in reducing avoidance through empty property rates?”
100% of Local Authorities unsurprisingly answered in the affirmative.
As a result, this has triggered that the six week “reset period” will be increased to thirteen weeks from 1st April 2024.
This will require new legislation to bring this into effect, but the impact will be that where a landlord has an empty property, any short-term lets of less than 13 weeks will still mean that a liability for empty rates will continue.
It has also avoided any consideration of why commercial premises are empty and has little, if anything to address the problem of rows of empty shops on the High Street and is purely a money grabbing exercise.
These changes are disappointing as the changed rules in Scotland and Wales have not resulted in more properties being let but has resulted in landlords who are unable to find a tenant for their vacant properties, or those who have short term tenants, paying more in business rates liability.
Many commercial property owners will want the security of a long-term tenant but if faced with possessing an empty property will accept a short-term tenant if the consolation factors are that a) at least there will be a short-term income and b) they will not be faced with an empty rates bill as soon as the tenant leaves as a further three months will be available to them.
This “short-term” tenancy will now have to last for three months to be of any benefit.
Finally, the ugly…
The Government has announced that, on the back of the consultation exercise of last summer, it will be carrying out a further consultation on the introduction of a “General Anti-Avoidance Rule”.
What appears to have been missed is that there are genuine empty rate mitigation schemes in operation that have been tested in the courts and found to comply with the legislation. What one may describe as “mitigation” another will describe as “avoidance”; it is purely a case of whether one is a ratepayer or a rate collector.
With a rates regime that is so punitive it seems iniquitous that there is further renewed effort into scrapping schemes that are at the end of the day, legal in an attempt to squeeze further revenue from business ratepayers, many of whom will contribute to local coffers but have little representation.
How Colliers and Accurates can help
Over the years Colliers and Accurates have a proven track records of saving clients millions of pounds by way of business rates ensuring that these clients pay a fair contribution to the local economies in which they are based.
We will continue this effort and ensure that those reliefs both new and existing continue to be applied correctly.
We will welcome the opportunity to contribute to the consultation of the “General Anti-Avoidance Rule” and will ensure that the interests of all clients are effectively represented.
Author:
Richard Sheppard
Head of Accurates
