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Councils in England will now be able to set business rates in their area, thanks to a new plan unveiled by Chancellor George Osborne.
Councils will be able to keep the proceeds raised from business rates in their area, and will have the power to cut or increase rates.
The councils will hold onto £26 billion, which the Chancellor has dubbed the ‘biggest transfer of power’ in recent history, according to the BBC.
At the moment, councils hold on to 50 per cent of the rates, with the rest being transferred to Westminster.
Although the move has been welcomed by the likes of The Local Government Association (LGA), Labour has warned that it could cause a race between councils competing to cut their rates the most.
Businesses currently pay a fixed business rate that is set by central government; councils then collect the tax and send the funds to the treasury.
This is then sent out to areas with fewer businesses, so those areas don’t miss out, but now that councils will be in charge of setting an amount this may not be the case anymore.
But what does this mean for indie PC retailers and other SMBs? This new rule will certainly give councils much more power and we could start to see councils hiking up business rates a considerable amount.
Mike Flecknoe, senior director for the rating team at Cushman and Wakefield, said: “This is a huge step that reverts to the pre-1990 system of councils keeping the business rates revenue for their area. It should foster closer links between councils and business, which is positive as business rates do pay for many local services.
“However we need greater clarity to understand the consequences. What happens about equalisation? Will there still be some redistribution of rates revenues from urban councils with many high street businesses and high property values, especially in London, to councils without the tax base to pay for the current level of services provided? Clearly, that will need addressing to avoid many councils losing out substantially.”
Businesses can pay the current business rate out-right or through a series of 12 instalments, but depending on how much the rate will be set at, this could make things incredibly difficult for indie retailers.
In contrast, the British Retail consortium has welcomed the change to business rates.
A spokesperson added: “We look forward to learning more about the Chancellor’s plans to fundamentally reform the business rates system in the autumn. Today’s announcement only highlights the urgency of reforming this outmoded tax which acts as a drag on the economy.
"We will now look closely at the detail as it emerges but it’s worth remembering that there is a widespread consensus that any package of reform to the system must address head on the need to reduce the burden of a tax that discourages investment in jobs and growth.
"The national business rates multiplier needs to be frozen, and then reduced to encourage local and national growth. The detail of the Chancellor’s plan and ongoing review is now absolutely essential."
In late 2013, the UK Government offered small businesses, including indie retailers, a £1,000 discount on rates.
Plus, earlier this year the Chancellor revealed during the 2015 Budget announcement plans to carry out a radical review into the business rates system, and it seems this has finally happened.
The change to the rates is planned to be in place by 2020, so businesses have a few years to get their head around the upcoming changes. Let’s hope that councils do not take advantage of this new power and that indie stores will not suffer.
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