The UK government has acknowledged concerns regarding business rates, particularly the ‘cliff-edge’ effect that penalises small businesses when expanding. An interim report signals reforms aimed at making the system fairer and encouraging investment, with further details expected at the upcoming Budget.
Key Takeaways
- Government to review Small Business Rates Relief (SBRR) to address ‘cliff edges’ that deter expansion.
- Consideration of enhanced Improvement Relief and fairer transitional relief.
- Permanent lower rates for retail, hospitality, and leisure properties from April 2026.
- Stakeholder engagement ongoing to shape future reforms.
Addressing ‘Cliff Edges’ for Small Businesses
The government’s interim report highlights a commitment to reform business rates, specifically targeting the issue where small businesses lose all Small Business Rates Relief (SBRR) upon opening a second property. This abrupt increase in costs can discourage growth and investment. The review aims to smooth these transitions, potentially incentivising businesses to expand and create jobs.
Support for Retail, Hospitality, and Leisure
Businesses in the retail, hospitality, and leisure sectors are set to benefit from permanently lower business rates starting April 2026, provided their rateable value is below £500,000. While this offers long-term certainty, sector bodies are urging for clarity on the implementation and the level of reduction, with many hoping for a 20p reduction in the multiplier.
Enhancing Improvement Relief and Other Measures
Further measures under consideration include enhancing ‘Improvement Relief’, which supports businesses investing in their premises. Proposals suggest extending this relief from 12 months to three years and including investments in plant and machinery. The report also mentions reviewing the Valuation Office Agency’s functions and potentially removing items like CCTV from the rating list to prevent double taxation. The government has also decided against more frequent revaluations based on stakeholder feedback.
Industry Reaction
Business groups, including the Association of Convenience Stores (ACS), the British Retail Consortium (BRC), and UKHospitality, have welcomed the government’s recognition of the need for reform. They emphasize that addressing the ‘cliff edges’ and ensuring a fairer, more predictable system is crucial for encouraging investment, job creation, and the overall health of the high street. However, many are awaiting the Budget for specific policy details and the extent of the proposed changes.
Sources
- UK government to review business rates ‘cliff edges’, Logistics Manager.
- The ACS, the BRC and more welcome the Government’s new interim report on business rates, Convenience Store.
- UK Government set to make business rates in England fairer, Scottish Local Retailer.
- Chancellor commits to reform of Small Business Rates Relief, Marketing Stockport.
