Tough talking: George Osborne said that business rates increases will be linked to the Consumer Prices Index rather than Retail Prices Index
Big firms should be braced for tax hikes in order to shoulder the burden of George Osborne’s ‘small business Budget’, experts have warned.
The Chancellor said on Wednesday that local authorities would be compensated for their loss of revenue from small firms. But analysis by property consultants including Colliers International has raised the alarm that this could be reaped from other companies.
After years of campaigning for businesses, particularly small shops, to be given a lighter rates burden, the Chancellor announced last week that small firms would receive concessions.
The Mail on Sunday has run its own campaign for four years after identifying that business rates had become a significant factor in town centre decline and the closure of small shops.
The Chancellor also said that by 2020, business rates increases would be linked to the Consumer Prices Index rather than the Retail Prices Index. RPI often tracks well above inflation.
He will also cut the five-year rates revaluation cycle to three years to better reflect fast-moving property prices.
The cuts to rates paid by small firms mean that from April 2017 an estimated 600,000 will not have to pay anything, while an additional 250,000 will pay lower sums.
However, John Webber, head of rating at Colliers International, said: ‘This was great news for small businesses, the flower seller in Stockport, but I don’t think this is going to be very good news for any large businesses.
‘As the detail of this Budget emerges, it looks like the result for bigger businesses is that they will end up shouldering more of the liability for rates. We don’t know yet where the increases for larger business will be, but the suspicion is that there will be an increase in the supplement paid on larger properties.’
Paul Turner-Mitchell, a business rates expert and campaigner, said he had come to the same conclusion. He said that the Chancellor would need to find another £6.7 billion to compensate local authorities over the next five years.
This is unlikely to come from the Treasury and Turner-Mitchell said there was an ‘inescapable conclusion’ that big firms would be hit, perhaps through a multiplier introduced when the latest valuations come out in the autumn.
The Chancellor said he would permanently raise the threshold for small business rates relief from properties with a rateable value of £6,000 to £12,000.
Those with a value of up to £15,000 will get tapered relief. The threshold at which firms pay higher rates rises from a rateable value of £18,000 to £51,000.
The rise in the thresholds has been widely welcomed by support groups for small firms.
The Treasury last night denied that rates for big firms would increase. But it said it could not be specific about where the extra money would come from.
Local authorities have been assured by the Treasury that they will be compensated for the loss of business rates but other sources said details are unlikely to be revealed until 2017.