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Business rates retention for councils

wantspacegotspace.co.uk - Business rates retention for councilsA new scheme, where local authorities will receive 50 per cent of locally generated business rates, took effect from 01 April 2013 reports commercial property agent Prop-Search.

The Act means that councils will be able to keep a proportion of the business rates revenue, as well as growth on the revenue that is generated in their area for a seven year period.  It is aimed at creating an economic incentive for councils to generate greater levels of income, support local businesses and create jobs.

Samantha Jones, a Surveyor at Prop-Search, says: “Currently, all business rates generated by local authorities are centrally collected by the Treasury and then redistributed to councils through a grant system, where councils are invited to bid for grants for different projects.”

At the beginning of the scheme, the Government will carry out calculations to ensure that councils with more business rates than their current spending will make a tariff payment to Government.  Similarly, where councils have greater needs than their business rates income, they will receive a top-up payment.  The total sums of these payments will equal each other.

The Government maintains that the new law could deliver over a £10 billion boost to the wider economy and generate more business rate income for councils to help pay off the deficit and support frontline services that protect vulnerable communities.

Samantha adds: “Whilst, at first glance, this scheme appears to be an incentive to councils to stimulate growth and loosen planning restrictions on commercial schemes, in reality it is questionable whether this will be of any benefit to councils outside of London where there may be reduced demand for additional space.  In particular, in parts of the country, where there is very little demand for new commercial premises, this will make no difference at all to either increasing the revenue of local councils or stimulating the local economy.”

The details of the scheme show that any increases in business rates from new commercial developments that a council is able to retain, will have to be offset against any rate losses resulting from successful appeals against existing properties in their area and could leave very little in the pot.

The Act also implements TIF, a framework under which Councils are able to generate funding for infrastructure developments by borrowing against predicted increases in business rates.

Posted by The Editor (wantspacegotspace) on 13th April 2013 (updated 15/04/2013)

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