Our Commercial Property trainee solicitor Tod Davies looks at the latest review into business rates and its potential damaging effects on Welsh businesses.

The first review into business rates in seven years has created considerable upset, with businesses in England calling it ‘outrageous and unfair’ and property experts in Wales predicting the closure of rural high street shops as well as jeopardising independent retailers in city centres. 

Business rates are essentially a tax primarily based on how much a property would cost to rent. A review of business rates normally occurs every 5 years and a controversial 2 year delay has meant that the rise has been more sharp and painful than usual, especially for small businesses. David Gauke, the chief secretary to the Treasury, has hit back at the ‘scaremongering’ stating that the majority of businesses will pay the same rates, although it seems around a quarter will see their bills rise. 

The rise has been offset to a certain extent by a broadening of the exemptions and reliefs system, such as the increased threshold of the rateable value of empty properties (from £2,600 up to £2,900) from 1 April 2017 in England. However no such extension to the reliefs system has been enacted yet in Wales (control over business rates was devolved to the Welsh Assembly in 2015). The high rates and disparity with England prompted a petition from a Cowbridge book shop (see below) and commentaries that small businesses in Wales would be left behind in comparison to their English counterparts.

With this review, there are winners and losers, and it seems in Wales the losers are rural high streets, especially those in localities that have experienced significant improvement since the last review in 2010. Parts of Monmouthshire are caught, and a book shop in Cowbridge is a notable example, which will now pay the cost for the market town’s current ‘sought-after’ status – which will mean a tax rise in real terms of about 273%. This mark-up is not reserved for rural areas however, with the rateable value of Swansea’s Liberty Stadium, listed as £300k in 2010, now marked up to £1.2M in 2017.

However, fears in Wales have been alleviated by the revelation of long awaited plans by Finance Secretary Mark Drakeford AM. First announced in December last year, but only revealed in detail on 17 February 2017, the plan is to inject £10 million into the rates relief scheme, mostly capturing small high street businesses. This is welcome news for businesses, although the Welsh Conservatives have pointed out there is still a lack of clarity over eligibility and Labour’s ‘painfully slow’ response to the revaluation has put local councils under significant pressure. Plaid Cymru, who played a critical role in ensuring this relief injection was included in the Budget they agreed with Labour in October, have also welcomed the news, but have said that in future there must be more regular revaluations to ensure a fairer system.