Future of business rates retention
The government is aiming to increase the level of business rates retention from the current 50% to 75% from 2020 in a way that is fiscally neutral. It is also intending to implement reforms to the business rates retention system to ensure local councils have the levers and incentives they need to grow their local economies.
A consultation seeking views on the proposed reforms has also been launched today. The consultation seeks views on how the business rates system can be reformed to continue to provide a strong incentive for local authorities to grow their business rates bases. It proposes a change in how the system is administered to mitigate the volatility business rates appeals have on local authorities’ income and to help minimise complexity in the system.
Business rates pilots
To test out aspects of proposed business rates reforms in a wide range of areas across the country, the selection of 15 areas as 75% retention pilots for the 2019-20 financial year has also been announced.
Communities Secretary the Rt Hon James Brokenshire MP also confirmed that London would be piloting 75% rates retention in 2019 to 2020.
And as previously confirmed, pilots originally launched in 2017 in devolution deal areas will continue on the existing basis in 2019 to 2020.
The pilots will inform the government’s proposed reforms ahead of a renewed business rates retention system being introduced in 2020 to 2021.
Business rates levy account surplus to be redistributed to councils
Local authorities play a key role in supporting economic growth.
The current business rates retention scheme is performing well, with local authorities estimating in 2018 to 2019 they will keep around £2.4 billion in business rates growth.
As a result of increased growth in business rates income, the government has announced it is intending to distribute £180 million of the levy surplus to all local authorities and proposes to share it on the basis of need.
A consultation on this has been launched as part of the provisional settlement.
The areas selected for business rates pilots are:
- Berkshire
- Buckinghamshire
- East Sussex
- Hertfordshire
- Lancashire
- Leicester and Leicestershire
- Norfolk
- Northamptonshire
- North and West Yorkshire
- North of Tyne
- Solent Authorities
- Somerset
- Staffordshire and Stoke-on-Trent
- West Sussex
- Worcestershire
