By +Eric Jafari
As of April 2013 a business rate
retention scheme is to be introduced nationwide, but there
are those that question the impact it will have on commercial
property beyond London. Currently, it is hoped that the arrangement
will act as a direct link between business rates growth and the
amount of money councils spend on local people and services. Under
the scheme, councils will keep a proportion of business rate
revenue, as well as growth on that revenue.
According to the government, this will be a "strong financial
incentive" for councils to promote economic growth in their area.
In terms of real estate, the policy could facilitate a raft of new
planning approvals, as officials look to capitalise on the rate
retention capabilities latent in the creation of more commercial
enterprises, including hotels and retail spots.
Business rates retention is now at the heart of the government's
reform agenda, promoting economic growth and localism. When the
scheme commences, calculations will be carried out to ensure that
councils with more business rates than their current spending will
make a tariff payment to the government and those with greater
needs than their business rates income receive top-up payments.
The levels of tariff and top-up payments will remain fixed, but
will increase annually in line with the Retail Price Index. This
will not change until the system is reset, which will occur in 2020
at the earliest to give councils the certainty they need to plan
budgets. Safety net payments will also be provided in case a
council's business rate income falls by a certain amount, due to a
major closure, for instance.
However, there are some that question the effectiveness of such
a scheme, including Peter Chapman from Cluttons. "Whilst, at first
glance, this scheme appears to be an incentive to councils to
stimulate growth and loosen planning restrictions on commercial
schemes, in reality it is highly questionable whether this will be
of any benefit to councils outside of London where there is little
demand for additional space," he said.
"In particular, in parts of the north-east, where there is very
little demand for new commercial premises, this will make no
difference at all to either increasing the revenue of local
councils or stimulating the local economy," Mr Chapman continued,
adding that in actuality any increase in business rates from new
commercial developments will have to be offset against losses
incurred from successful appeals against existing properties.
14 January 2013
Business Rate Retention Scheme,Government Reform Agenda,Cluttons