The Treasury has hit back at “scaremongering” about its changes to business rates as the government comes under pressure from companies to scrap its plans at the budget.
David Gauke, the chief secretary to the Treasury, insisted that the vast majority of business will see no change or a fall in their rates, while a quarter will see their bills rise.
His robust defence of the revaluation is likely to dampen speculation that the move could be reversed in Philip Hammond’s budget next month.
The government is facing mounting calls for a rethink after warnings from some shops and other businesses, particularly in London, about the crippling effect of the revaluation which comes into force in April.
New rates will be set by the Valuation Office Agency in the coming weeks, and rates are set to rise unusually sharply in areas where property prices have increased sharply.
The increase in business rates from April is the result of a new revaluation of the rental value of property in Britain. This is supposed to take place every five years but the previous revaluation was controversially delayed by the government for two years, making the change in bills from April more pronounced.
London will be particularly affected because the rental value of property in prime areas has increased substantially since the financial crisis.
But Gauke said: “Far from the picture painted by scaremongering ratings agents, nearly three quarters of businesses will actually see no change, or even a fall, in their business rates bills.
“The fact is that the generous reliefs we are introducing mean that 600,000 small businesses are paying no business rates at all – something we’re making permanent so they never pay these bills again.
“Whether on a town’s high street or in a rural community, we’ve also introduced £3.6bn in support for companies affected by the business rates revaluation – a process that is making the system accurate and fair for everyone.”
Thousands of firms are expecting changes to their tax bills as a result of the revaluation, although the government says transitional arrangements will be in place to help businesses cope with their new rates.
On Wednesday, the Institute of Directors (IoD) urged Hammond to tackle anomalies in the tax system that see high street shops pay higher rates on small premises than online giants do for vast warehouses.
It said the chancellor should use next month’s budget to set up a New Economy Tax Commission to make the system fit for the modern age of internet shopping and the “platform economy”.
With many small shops and pubs bracing themselves for sharp rises in their tax bills due to business rate revaluations this year, the IoD called for further relief for businesses based in properties worth up to £100,000.