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Small business rate reforms may jeopardise relief

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Reforms to the business rate system that are intended to help could actually have an adverse effect on the tax breaks available to small enterprises, the Forum of Private Business (FPB) has argued.

The new Localism Bill has set out plans for ending the need for small firms to complete an application form in order to claim the small business rate relief (SBRR).

In place of the form, the small business rate multiplier will apply automatically to those firms that qualify for the SBRR.

However, the government has said that “councils will be free to administer the SBRR in a way that best serves local businesses and local needs.”

In the view of the FPB that could place in doubt some of the £500 million a year that businesses are already able to claim.

Andrew Bacon, the FPB’s property adviser, said: “The recent announcement regarding Small Business Rate Relief has only made the Small Business Rate Multiplier automatic, which will result in a 2 per cent drop in rate liability for businesses which haven’t claimed – a trivial sum.

“Removing the need to fill in a form to claim SBRR is only a ‘positive’ if SBRR is genuinely made automatic, as it is in Wales. But that is not what is being proposed. It is now to be granted at the discretion of councils.

“If the Localism Bill also makes councils collect extra rates under the Business Rate Supplement scheme in order to pay for SBRR, or allows them to keep what they collect in rates, granting SBRR becomes a budgetary decision for councils. If they don’t have the cash, or can’t raise it through the supplement, local businesses won’t get SBRR. 

“As we are still facing an extremely tough economic climate, the upshot of this could be that SBRR disappears, with small businesses being £500 million worse off. If it is no longer going to be automatic and will be at the whim of a council, they need to be told this.”

The FPB has been campaigning for the relief to apply automatically so that its benefits are not lost on businesses that are unaware of the business rates breaks open to them.

Jane Bennett, the FPB’s head of campaigns, added: “We welcome the principle of giving councils more powers to assist struggling small businesses, but £200 million in rate relief already goes unclaimed each year. If SBRR is sacrificed by cash-strapped local authorities as a budgetary decision the proposed changes risk making the problem worse, not better.

“It is the responsibility of the government to clarify that it is the Small Business Rate Multiplier that will apply automatically, rather than the full relief itself, in order to allow business owners to plan ahead properly.”