UK Chancellor George Osborne announced the government’s 2016 Budget last week and revealed a major shakeup to business rates, the tax paid on UK business properties. Turner Little considers how this policy change could benefit UK small to medium sized enterprises (SMEs).
Supporting SMEs
Prior to the announcement of the Budget, online business site Bdaily asked West Yorkshire business leaders what they hoped the government would deliver with this policy speech. The publication spoke to Turner Little’s Managing Director, James Turner, who believed the Budget should provide support to SMEs both in the Yorkshire area and across the UK.
Turner was quoted by Bdaily saying: “My aspirations regarding the upcoming Budget would be for the government to offer greater support for new and smaller firms… If local authorities were permitted to offer start-ups a two year rate-free period on property, this would significantly benefit companies during the initial starting up period.”
Business rates shakeup
As it turned out, Osborne announced a change to business property tax policy that should provide support to smaller companies. SME portal Small Business reports that as of next year, some 600,000 British small businesses will be taken out of business rates.
The Chancellor suggested that some 250,000 companies will see a reduction to their business rate bills due to the new policy and half of all business properties will pay either no or less business rates. Osborne argued that this alteration to UK business rates will also save small UK firms £6,000 per year.
New rate calculations
The Chancellor also announced the government will adjust how it calculates future business rate rises. This process used to be based on the Retail Price Index (RPI) but going forward, the Consumer Price Index (CPI) will be used to determine business rate rises. Commenting on the changes to business rates James Lowman, the Chief Executive of the Association of Convenience Stores, said:
“The increased small business rate relief threshold will be a welcome measure for thousands of local shops who are facing rising costs in other areas of their business. This measure will also significantly reduce the burden on the VOA, as more stores are taken out of paying rates altogether. We welcome the move from RPI to CPI for annual business rate increases but urge the Chancellor to cap rates increases in line with the government’s 2% inflation target.”
Whitehall clearly recognises that UK SMEs need support to thrive. The government’s decision to change business rates should allow smaller businesses to save money, making it easier for entrepreneurs to create and sustain new companies going forward.
Turner Little
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider.