In his Spring Budget in 2017, the Chancellor of the Exchequer pledged £435 million to help small businesses that are affected by the business rates revaluation. Critics have said it’s not enough and that the current business rates system doesn’t reflect today’s modern enterprises and needs an overhaul, not just pots of money to provide temporary relief.
The Budget set out that small businesses with a ‘rateable value’ of £12,000 or less, would be exempt from business rates – that equates to around 600,000 enterprises. A further 50,000 businesses with rateable values of between £12,000 and £15,000 are eligible for rates relief on a sliding scale.
But what does that actually mean in plain English? Well, in England and Wales, businesses such as shops, pubs, offices and warehouses all pay business rates. How much they pay depends on what’s known as the ‘rateable value’ which is how much its premises were worth on the open rental market back in 2008. That rateable value then corresponds to a ‘multiplier’ which is set by central government (there are two multipliers – ‘standard’ and ‘small business’). You then need to multiply the rateable value by the multiplier to get the amount of business rates you need to pay – clear as mud?
So, for example – if you own a shop and it has a rateable value of £12,000, you’ll need to multiply that by the ‘small business multiplier’ which for the year 2016/2017 is 48.4p – the result is £5,808 which is what you’ll pay in basic business rates. Under the proposed changes, if the rateable value of your business is £12,000 or under then you won’t have to pay anything.
But the changes don’t stop there, the Chancellor is also increasing the number of firms that are classed as ‘small’ and therefore use the lower ‘small business’ multiplier rate; which should benefit around 250,000 small companies.
Local councils will get a £300 million fund to enable them to help small businesses in their area. They’ll be able to use the money to provide further rates relief at their discretion.
Pubs will also get £1,000 worth of relief if their rateable value is £100,000 or less – but this only applies for a year. By the Chancellor’s calculations, that should mean around 90% of all pubs are eligible for the one-off discount but the British Beer and Pub Association have said his numbers don’t add up and that only a smaller proportion would benefit from the reduction.
The Director of the British Chambers of Commerce, cautiously welcomed the light relief offered to small businesses but said the Chancellor’s measures didn’t really go far enough ‘to improve the broken business rates system’.
But regardless of whether the changes affect you or what your opinion is – business still carries on as usual. So, make sure you’ve got yours protected with the right kind of insurance and comparethemarket.com today.