Welsh parties race to offer best deal on business rates

'Why they need to go further' - a review of parties' business rate manifestos ahead of Thursday's elections

4 May 2016

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Andrew West, Partner and Director of Business Rates at Cooke & Arkwright, reviews the parties’ business rate manifestos and explains why they need to go further: Businesses lending an ear to the various political representations being made ahead of next week’s election may find themselves bemused over the rates pledges which seem to be rolled out across manifestos. This race to offer businesses the best deal is unsurprising, as the parties use both the Welsh Government’s newly devolved powers over business rates and the recognition that businesses are the backbone of the Welsh economy as leverage for their campaigns.

At present, 60,053 commercial properties in Wales with a rateable value (RV) of £6,000 or less enjoy rates exemption and there is a tapered scheme of relief for those with a rateable value up to £12,000 RV. The RICS Rating and Local Taxation Policy Group, of which I am I member, has been making representations to the Westminster Government and Welsh Government for many years and one of our primary demands is to remove smaller businesses with assessments of less than £15,000 RV from rates permanently. This would give an additional 25,764 small businesses in Wales greater certainty and mean they no longer need to wait with baited breath to see if the small business rate relief scheme would be renewed at the start of each financial year.

In their manifestos, the Welsh Conservatives and Plaid Cymru have gone the furthest to addressing this demand by extending the number of commercial properties that qualify for rate exemption to varying degrees, and increasing the tapered relief threshold. However, it is fair to say that these parties could improve their propositions to ensure more certainty for small businesses. The fact is smaller commercial properties contribute little to revenue, while demanding resource in administration, so extending the exemption to £15,000 RV on a permanent basis is not an unreasonable demand.

One of the main demands that would be welcomed by smaller businesses, but which is missing from all but one of the parties’ manifestos, is to implement more regular revaluations to correct movements in property values and maintain a fairer tax base. This has become particularly poignant during the recession, when it was not uncommon for high street retail rate demands to be four or five times the current rental value. Plaid Cymru has proposed introducing three-yearly revaluations, which would be a good start and would have avoided the perpetuation of excessive bills for those businesses worst affected by the recession. Over time it would be desirable to move to even more frequent revaluations, perhaps with annual valuations achieved within ten years.

Plaid Cymru and the Welsh Liberal Democrats have also pledged to link the rates multiplier to the lower Consumer Price Index, rather than the Retail Price Index, something which the property industry has long been calling for, to avoid businesses suffering from declining income against increased rate bills.

One of the opportunities which has been missed by all but the Welsh Liberal Democrats is a pledge to remove plant and machinery from the rateable value of commercial premises. At present the Port Talbot steel works has a £20,900,000 RV, which gives an idea as to how significant the burden is upon heavy industry.  Exemption of plant and machinery has been called for and is logical, laudable and sensible to benefit our beleaguered steel industry.

While we can’t say that any of the parties have got it completely right, it is welcoming to see rates at the forefront of election agendas. In this year’s spring budget, the Chancellor committed to more regular revaluations, doubling the exemption for small businesses permanently and linking the multiplier to the Consumer Price Index in England. Whatever the outcome of the election, it is hoped that Wales will go further than the UK Government in giving businesses more certainty about rates and explore innovative improvements to rates to encourage investment.

This article featured in the Western Mail daily newspaper on 4th May 2016.