The Chancellor delivered his 2015 Autumn Statement and Spending Review on 25 November and, while this has been generally well received, many business rate payers and their advisors were left disappointed at what was not said and the effects this will have on many business rate payers. Paul Easton, National Head of Business Rates at Lambert Smith Hampton explains.
No extension to the empty retail relief scheme
In the 2013 Autumn Statement, the Government announced that it would provide a 50% business rates discount for a period of 18 months for businesses moving into previously empty retail premises (minimum of twelve months occupation) between 1 April 2014 and 31 March 2016.
This relief was widely welcomed and was not subject to any limit on rateable value/size of premises except the State Aid De Minimis Limits of €200,000 over a three year period. In some cases therefore the amount of retail relief would not last the full 18 months if the limit was exceeded before then.
The Chancellor failed to extend this beyond 31 March 2016 in his 2015 Autumn Statement and landlords or tenants who are thinking of letting or occupying a retail property that has been empty for more than 12 months should therefore make sure they are signed up and in occupation before 31 March 2016 in order to qualify.
One or two tenants have failed to obtain this reoccupation relief because a landlord has been operating a rates mitigation scheme and so the property will not be classified as having been empty.
No extension to the retail relief scheme
Answering calls from the retail sector, in his 2013 Autumn Statement the Chancellor announced a new retail relief scheme for retail properties that would apply for the 2014-15 and 2015-16 billing periods.
The scheme applied to properties that were wholly or mainly used for shops or restaurants, cafes and drinking establishments and granted them a £1,000 reduction in their business rates bills for 2014-15. This figure was increased to £1,500 for 2015-16 in the 2014 Autumn Statement.
To qualify, a property must be assessed at rateable value £50,000 or less and the State Aid Limit Rules apply. In 2014-15, a shop assessed at rateable value £50,000 would have paid £24,100 so the relief equated to a reduction of 4.15%. The following year it was 6.1%.
The Chancellor did not extend the scheme for 2016-17 in the 2015 Autumn Statement, which means that the same occupier who would have paid £23,150 in rates in 2015-16, will pay £24,850 in 2016-17 - an increase of 7.3%.
While it could be argued that this is a significant increase, retail premises were the only class of property to receive this relief. Office, industrial or leisure occupiers were liable for the full amount for 2014-15 and 2015-16.
No extension to new build empty property relief scheme
In the 2012 Autumn Statement, the Government announced it would exempt all newly built commercial property completed between 1 October 2013 and 30 September 2016 from empty property rates for the first 18 months, up to the State Aid Limits
The purpose of this scheme was to help stimulate development and construction. Construction projects factor in the risk of paying empty property rates on a newly built property if it is not fully occupied straight away on completion. By reducing the exposure to empty property rates it was hoped it may incentivise some commercial property development projects to go ahead that would otherwise not.
It is difficult to ascertain what impact, if any, this relief has had on speculative development. Many cities are currently suffering from a dearth of high quality office and industrial space so it could be argued that it has been minimal. The improving confidence in the occupier markets might also be sufficient to kick start the next development cycle and so the Chancellor’s decision not to extend the relief may equally go unnoticed.
So what did he say?
Read our summary of what was included in the Autumn Statement and Spending Review in respect of Business Rates here.