Local councils to be given all business rates proceeds by 2020

6th October 2015

Chancellor, George Osborne has announced plans to enable local councils across England to keep all the proceeds from business rates raised in their area.

Councils will also be able to cut and raise their business rates, with Mr Osborne calling it the “biggest transfer of power to our local government in living memory”.

Currently, local councils retain 50 per cent of all business rate proceeds with the rest being sent to Westminster. The switch to 100 per cent has been welcomed as “good news” by the Local Government Association (LGA).

The central government presently sets a uniform business rate for shops, offices, factories and businesses to pay.

Councils recoup the tax and send on Westminster’s share of the funds to the Treasury, which then redistributes them so that areas with fewer businesses do not lose out.

Mr Osborne said at the Conservative Party conference in Manchester that the change, which is due to be in place by 2020, would mean cities and local communities no longer had to go to the Government “with a begging bowl”.

“Attract a business, and you attract more money; regenerate a high street, and you’ll reap the benefits; grow your area, and you’ll grow your revenue too”, added Osborne.

The amount paid by businesses is calculated by multiplying the rental value of a property by either the standard rate (49.5p) or the lower rate (48p), before subtracting any rate relief.

Under the new plans, local councils would be given the power to cut these rates in order to entice more businesses into the area, creating additional investment and jobs.

In addition, elected mayors in large cities such as London, Manchester and Birmingham would be allowed to add a premium – thought to be capped at 2p – to pay for major infrastructure projects.

The British Retail Consortium (BRC), which has long led the charge for business rates reform, issued a cautiously optimistic response to the news, with a spokesman saying that “the detail of the Chancellor’s plan and on-going review is now absolutely essential”.

Meanwhile, John Cridland, director-general, of the Confederation of British Industry (CBI), the UK’s biggest business lobby group, said the “devil would be in the detail”.

“This must not be a way to increase rates without the consent of the local business community,” added Cridland.

Image: The CBI

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