Budget 2017: Business rates to be pegged to CPI from 2018

A planned cut to business rate rises in England has been brought forward by two years to 2018 by the chancellor.

From April, rates will rise in line with the lower Consumer Prices Index (CPI) measure of inflation, not the Retail Prices Index (RPI).

The move is worth £2.3bn to businesses over the next five years, Chancellor Philip Hammond said.

But Adam Marshall, director general of the British Chambers of Commerce (BCC), said "more remains to be done".

He said the chancellor's decision would lessen the impact of rate rises on hard-pressed firms, but that wider questions remained over Brexit.

"Businesses will expect greater boldness from the chancellor - and more radical support for infrastructure and investment - once a Brexit transition period is secured," he said.

In his Budget speech, Mr Hammond said the move would help the UK's 5.5 million small businesses - which he said showed "extraordinary vibrancy and resilience" but "are feeling under pressure right now".

Business rates, a property tax based on rental values, were due to go up next year in line with September's RPI of 3.9%, while CPI was 3% that month.

Helen Dickinson, chief executive of the British Retail Consortium, which campaigned for the switch alongside the BCC, said the move to CPI was "hugely welcome and positive".

She said: "It's clear that the chancellor has listened to the retail industry and the growing chorus from across business and commercial life who have spoken up in favour of action to mitigate rising rates bills.

"Crucially, this relief will unleash investment that retailers want to direct towards the needs of their customers."

Mr Hammond also promised a change in the law that led earlier this year to companies receiving much higher rates bills if their offices were in communal blocks and spread over several floors or separated by corridors shared with other occupiers.

A Supreme Court ruling on the definition of a single business space meant that small businesses using multiple spaces in a building were billed for rates as if they were separate premises. The higher charges were also backdated.

The Federation of Small Businesses said the end of what was dubbed "the staircase tax" would "throw a lifeline to thousands of small firms that had no time to prepare for this completely unfair and retrospective levy".

Mr Hammond said the change in the law would also be backdated, to compensate firms for the extra charges.

The two measures will help ease the impact of higher business rates, which rose sharply for many firms in April this year.

The change in rates reflected the first adjustment of rateable property values for seven years. Retailers in city centres where property prices have risen most, were hardest hit, on top of challenges from the weaker pound affecting the cost of importing goods and increasing competition from online retailers.

Mr Hammond said from now on revaluations would take place every three years, rather than the planned five-year period.

The move to bring forward the linking business rates to the lower measure of inflation will mean bills are lower than they would have been over the next two years.

According to Deloitte, a business in a London office block with a rateable value of £5.9m, would pay £3.07m in rates next year instead of £3.09m due to the change.

A typical shop in Manchester's Trafford Centre, with a rateable value of £347,500, would pay £171,000 instead of £172,700.

Gerry Biddle, director of business rates at Deloitte Real Estate, said the announcement "will be welcomed by hard-pressed business occupiers".

Mr Hammond also said he would also extend a £1,000 discount on business rates for small pubs for another year until March 2019. It applies to pubs with a rateable value of less than £100,000.