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More must be done to soften impact of business rates rise

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Plans for curbing the effects of increases in business rates, due next April, are not sufficiently far-reaching, the British Retail Consortium (BRC) has said.

The rateable values of all business premises in England are being reassessed according to property values on 1 April 2008. The rates bills that businesses must pay as from April 2010 will be based on this reassessment.

The government has said that many businesses will see their rates bills fall, while some will experience a rise.

To offset the effects of particularly large increases, the government is to introduce a transitional arrangement whereby the rise will be capped and the shortfall compensated for by a similar capping of the benefits to those businesses that gain from a fall in their rates charge.

Commenting at the end of the consultation period on the proposals, carried out by the Department for Communities and Local Government, the BRC applauded the transitional arrangements.

The retail group argued that the system would be fairer than imposing a general supplement on all businesses that enjoyed a fall in rates.

The BRC also said that the government was right to run the transitional scheme for the full five years until the next business rates revaluation.

However, the BRC criticised the plans for not placing a ceiling of 5 per cent on all business rates rises in the first year, given that many firms will still be struggling to recover from the recession.

The BRC claimed that some rises could be as high as 12.5 per cent in year one and up to 25 per cent in years four and five.

Doubts were also expressed over the ability of the scheme to remain cost-neutral within each year as opposed to across its entire five-year span.

Tom Ironside, BRC’s director of business environment, said: “In some of the toughest trading conditions seen in years, a scheme that regards a twelve per cent hike in retailers’ rates bills as OK isn’t doing its job.

“At a time when shop price deflation has arrived, piling costs like these onto retailers is a direct threat to their ability to maintain and create jobs. Retailers need to be cushioned from the worst effects of revaluation on their business rates bills. The government has got some key elements of the arrangements right but it needs to ensure it can deliver enough help to retailers at the time it is most needed.”