High street businesses in England will receive about £33m more in business rates relief than councils were originally told, after ministers corrected figures issued alongside the Budget. The revision increases the discount for retail, hospitality and leisure premises from next April, following the failure of the original guidance to account for September’s 3.5 per cent inflation rate.
The Department for Housing, Communities and Local Government sent revised guidance to councils last weekend, days after they had begun planning on the Budget-day figures. The national discount has risen from 5p to 5.2p in the multiplier used for eligible premises.
The correction means lower multipliers than those first published, rather than the removal of the inflation adjustment itself. Bills are still due to be uprated by 3.5 per cent next April. The revised discount accounts for the way that increase would otherwise erode the value of a fixed cash reduction.
Two multipliers reduced by 0.2p
Under the revised guidance, the small business retail, hospitality and leisure multiplier falls from the originally announced 39.7p to 39.5p. The standard multiplier for the same sectors falls from 44.7p to 44.5p. Both changes reflect the increase in the national discount from 5p to 5.2p.
The additional relief is worth about £33m across England compared with the figures councils initially received. That is the estimated overall increase in discounts, not an amount allocated specifically to London businesses or a measure of the saving for any individual premises.
For London retailers, pubs and restaurants, business rates are the largest tax bill for many businesses. The revision therefore changes an important figure for firms planning their costs from next April, even though it arrived only days after the first set of numbers.
The figures now being used replace those in the original Budget guidance. The small business multiplier of 39.7p and standard multiplier of 44.7p were the initial published rates, while 39.5p and 44.5p are the corrected figures. The distinction matters because councils and businesses had already started working from the earlier guidance.
Inflation adjustment missing from first figures
The original guidance provided for a 5p discount in the multiplier for retail, hospitality and leisure premises. However, it did not account for September’s inflation figure of 3.5 per cent, which will be used to uprate bills next April.
A fixed discount and an inflation adjustment do not operate in the same way. When bills are uprated, an unchanged cash discount does not maintain the same relative value. Raising the discount to 5.2p addresses that interaction in the revised figures.
The department told council officials that the change ensures inflation adjustments are applied consistently and reflects the policy intent. It did not say whether the first figures resulted from a calculation error or an omission. The reason for that initial failure has therefore not been specified.
The correction does not alter the stated inflation figure. Instead, it changes the discount applied alongside it. That is why the additional £33m is relief above the amount councils were first told to expect, rather than a cancellation of the planned inflation uprating.
Businesses had already begun planning
Alex Probyn, of the tax firm Ryan, welcomed the correction but said businesses had already begun planning around the rates published on Budget day, only to see them change within days. He said the interaction between inflation and a fixed discount was foreseeable.
His comments highlight the difference between the financial benefit of the revision and the uncertainty caused by changing published figures. Businesses will receive more relief than the original guidance indicated, but their initial planning was based on numbers that were subsequently replaced.
The sequence also raises questions about the certainty provided by the Budget figures. Councils had begun preparing on one basis before receiving another, while businesses assessing their future rates costs had to take account of the correction.
From next April, the revised retail, hospitality and leisure multipliers will be 39.5p for small businesses and 44.5p at the standard rate. These are the figures set out in the updated guidance, with a national discount of 5.2p rather than 5p.
The immediate result is about £33m more relief for businesses in England than initially indicated. The remaining uncertainty concerns how the first figures came to be published without the inflation adjustment, rather than the size of the correction now issued to councils.
