Tax & Accounting News

Helping hand on business rates

08/04/2009

The government has thrown another lifeline to struggling businesses by allowing them to defer payment of 60 per cent of the increase in their 2009/10 business rate bills until 2010/11 and 2011/12.

Business rates are adjusted each April in line with the Retail Prices Index (RPI) for the previous September. Inflation in September 2008 stood at five per cent and businesses feared the resulting rise in business rates would have had a serious impact on cash flow. RPI inflation has now fallen to below 0 per cent.

Government measures announced on 31 March 2009 mean that around £600 million in business rates on 1.6 million properties can be deferred over the next three years. Businesses to benefit include those affected by the end of the 2005 transitional relief scheme to spread payment of the increase in bills over a three-year period.

For the time being, businesses must keep paying their legally-established liability as set out on their current bills. Once the regulations are in place – expected to be by the end of July – local authorities will write to ratepayers, offering them the option of deferring part of the increase. Anyone choosing to do so will receive a new 2009/10 bill showing the benefit of the deferral, while bills for 2010/11 and 2011/12 will include the deferred amounts.

The move builds on the help given to businesses struggling to pay corporation tax, national insurance and VAT on time by HM Revenue & Customs’ Business Payment Support Service (BPSS). Since its launch in November 2008, it has helped 101,135 businesses to make affordable arrangements to pay £1.78 billion in tax.

Announcing the move, Chancellor of the Exchequer Alistair Darling said: "The government recognises that businesses need help now to ease their cash flow at a time when money is very tight.

“This measure will help businesses to smooth their rates payments over the next few years to deal with the effects of the recent spike in inflation."

Harris Lipman senior partner Barry Lewis said: “Any action that helps to improve cash flow in these difficult economic times can only be welcomed and we hope that it will help many more businesses to stay afloat.”

For more information on deferring business rates, please contact us.

 

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