Raymond Doherty 16 Feb 2017 02:17pm

Treasury defends business rates reforms

The changes to business rates, due to come into effect in April this year, are set to hurt small business, particularly in London

It was revealed this week that the business rates bill for offices in the City will rise by £1.4bn over the next five years, according to research from property specialist CVS, while the Institute of Directors (IoD) urged the government to “level the playing field” to help smaller businesses.

Recent analysis from the Institute for Fiscal Studies (IFS) predicted increases in the value of non-residential property in London are set to raise rates bills by 11%, on average, increasing the tax take by over £700m. London mayor Sadiq Khan has called the proposals "a real kick in the teeth" for the capital.

Several business groups have implored the government to reverse, or at least amend, the reforms in next month’s Budget.

Chief secretary to the Treasury, David Gauke, however, has said that the reports are “scaremongering.”

"Far from the picture painted by scaremongering ratings agents, nearly three quarters of businesses will actually see no change, or even a fall, in their business rates bills. The fact is that the generous reliefs we are introducing mean that 600,000 small businesses are paying no business rates at all – something we’re making permanent so they never pay these bills again.

“Whether on a town’s high street or in a rural community, we’ve also introduced £3.6bn in support for companies affected by the business rates revaluation – a process that is making the system accurate and fair for everyone," Gauke said, according to a report from the Guardian.

The British Chambers of Commerce (BCC) also wrote to chancellor Philip Hammond this week urging him to abandon the fiscal neutrality principle in business rates reform, calling it an “unacceptable barrier to fundamental reform”.