London the loser in business rates changes

06 March 2017 by
London the loser in business rates changes

London will pay an extra £800m in business rates to support services in other parts of the country.

That's according to the Institute of Fiscal Studies (IFS), which said it was a trend of "greater reliance" on the capital for revenues, the BBC reported.

London councils will see their incomes rise as business rates there jump while northern councils will lose out as rates fall, the IFS predicted.

The next business rates revaluation comes into effect on 1 April - the first for seven years.

About a third of businesses are expecting very sharp rises, with a fifth, mainly in the South East, expecting a rise of more than 40% immediately.

Many other businesses predicted to see small falls in the rates they pay.

Rates in London are due to go up by 11% above inflation over the next five years, while rates in northern England will fall by 10%.

A report by the IFS said that business in the capital will contribute an extra £400m a year to councils with less income from business rates through a system of "topping up" other local authorities.

In addition, all councils pay half their revenue from business rates to central government, seeing London councils will be paying an extra £400m into this central pot.

Hospitality industry associations including the Association of Licensed Multiple Retailers (ALMR), British Beer and Pub Association (BBPA), and British Hospitality Assocation (BHA) have been putting pressure on the government to reconsider its position on business rates.

The ALMR's three chief requests are: the introduction of sector-specific relief for pubs and bars, a capping of bills increases at 12.5%, and retention of a robust and fair system for appeals.

Last month, communities secretary Sajid Javid (pictured) announced plans to review business rates and spoke of creating a "level playing field" for businesses. He confirmed that chancellor Philip Hammond will use his Budget on 8 March to provide financial support to businesses facing increases. It is expected that he will pay out millions of pounds in compensation to small businesses in trouble.

Over the weekend, Hammond warned that there would be no "spending sprees" in the Budget and said that any surplus cash would be used to ensure the UK had enough "gas in the tank" for the coming years.

Government swamped with business rates appeals backlog…but government says many are ‘spurious' >>

Associations ramp up pressure on government over business rates >>

Association of Licensed Multiple Retailers welcomes business rate review >>

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