Rates burden on small business to be eased

Proposals to ease the burden on small business by introducing relief from business rates have been announced by Local Government Minister Nick Raynsford.

The new scheme will see rate relief available at 50 per cent for business properties with a rateable value of £5,000. Under the plans the relief will decline on a sliding scale as rateable value increases, reaching no relief at a rateable value of £10,000.

Research conducted by the government shows that if the thresholds are not changed, the number of small businesses eligible and expected to claim relief would be 360,000.

The plans were first announced in 2001 in the White Paper Strong Local Leadership - Quality Public Services. However the proposals then were for thresholds between £3,000 and £8,000.

In addition, today's proposals add a buffer zone so that business properties between £10,000 and £15,000 will not have to contribute to the relief.

The changes reflect the fact that rates are a heavier burden for small businesses, in relation to turnover and profits, than for larger businesses. The cost of the relief will be borne by larger business ratepayers and not the general taxpayer. The cost of relief on current thresholds would be a supplement rate of 0.4pence or a 1% increase in bills.

Nick Raynsford said: "Government recognises that the current system of business rates places a disproportionate burden on small businesses. The small business rates relief scheme will address that.
The proposals I have announced today are significantly more generous than those in the original white paper. However we estimate that the cost to larger businesses will add only 1.6% to rate bills, well within the commitment we made that their bills would increase by no more than 2.5%."

The new regulations will be finalised in the Autumn and businesses will have to register by 31 December 2004. The small business rates relief scheme will become effective from 1 April 2005.

In future, businesses may apply for the relief by registering with the billing authority at any stage in the year and up to six months after the end of the financial year concerned.