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Government asks for views on business rates relief scheme

A consultation has been launched on a £2 billion relief scheme aimed at helping businesses cope with rises in their rates bills.

The five-yearly revaluation of business properties comes into effect as from next April.

The government has said that the majority of businesses (60 per cent) will see a drop in the rates they pay but conceded that some may end up paying more.

To support those businesses, a £2 billion transitional relief scheme has been set up to limit and phase in those increases to rate bills that result from the revaluation.

The relief scheme is self-financed, which means that money collected in areas of the country where rateable values have fallen will be redistributed to help balance the bills of those businesses where values have risen.

As a result of revaluation and the relief scheme, the government estimates that about one million businesses will see an average rates decrease of £770 in 2010/11.

High street retailers will be largely unaffected, while the industry and manufacturing sector, from large factories down to small workshops and start-up units, could expect falls of 3 per cent or £175 million.

Average rate bills will fall or stay on hold for all regions in England and Wales, except in the cases of London and the South West where there could be average rises of 3 per cent and 1 per cent respectively after the transitional relief has been applied.

Under the relief scheme, caps will be imposed to make sure that no small business faces an increase in its rates bill of more than 5 per cent in 2010-11; the cap on rate increases for medium and large businesses is 12.5 per cent. The caps are before inflation, so if the Retail Prices Index is negative in September, the maximum increases in bills would be lower.

The government consultation is aimed at finding out whether the caps should cover a five-year period instead of the present four years.

Rosie Winterton, the Local Government Minister, said: “Overall, the effect of revaluation for the majority of businesses could be a reduction in their rate bills next year, with some of the largest decreases in sectors such as industry and manufacturing.

“But while most will see falls, for the minority with increases we are putting in support to help keep down potential rises and we are today consulting and asking business how this scheme should run.”

Details of the consultation can be found at www.communities.gov.uk/publications/localgovernment/nndrrevaluation2010

In another announcement, the government said that businesses will have the option, as from the end of July, to apply to defer up to 60 per cent of this year’s 5 per cent rise in business rates. The deferral can take place over the next two years.

The plan was introduced by the Chancellor as a way of softening the increase, the level of which was geared to last September’s 5 per cent rate of inflation.