Business rates review underway

agendaNi takes a look at the Department of Finance and Personnel’s review of Northern Ireland’s business rates.

The Department of Finance and Personnel’s (DFP) Minister, Arlene Foster MLA recently announced the start of a consultation period for her department’s review of Business Rates in Northern Ireland. Launching the consultation process the minister said the review was a timely one and is something that the business community and other ratepayers have been pressing for.

She also said the review is not about raising more money but ensuring that Northern Ireland had the best and most acceptable system of raising revenue to help fund its public services and that she felt it was vital to hear the voices of businesses and other ratepayers, including those who currently benefit from reliefs and exemptions.

Business rates are a tax based on non-domestic property values that help fund public services in Northern Ireland. Business rates are levied on the occupier and in the case of a vacant property, they are levied at a lower rate on the person entitled to possession, usually the owner. From 1st April 2015, values are based on a statutory definition of the rental value of a property as of 1st April 2013. The total amount of money raised through non-domestic rates in Northern Ireland in the 2014-2015 financial year was roughly £592 million.

Broadly speaking, non-domestic properties of the same rental values attract very similar rates bills here and in England. Within Northern Ireland the average charge is around 55p per pound of rateable value. The corresponding business rate in England is 49.3p, 48p in Scotland and 48.2p in Wales, but in the rest of the UK this value is based on 2008 rental levels, not 2013 as is the case in Northern Ireland.

The department is open to a number of considerations to alter the rating system though does feel that the current system scores highly as it is relatively efficient, allows for flexibility and is difficult to evade as it is very clear who the occupier of a commercial property is. The DFP however acknowledges that it may be necessary to look at the process and frequency of revaluations, the system of reliefs, widening of the tax base and perhaps, aligning the system to an ability to pay. The department also recognises the need to improve Land & Property Services’ collection performances to maximise the amount collected and reduce the overall burden on ratepayers. 

The department is of the belief that very few taxation systems would actually represent an improvement on the current system and believes that many may result in unintended consequences that could detrimentally alter the economic landscape of Northern Ireland. Despite this concern, it remains open to possible alternatives and is willing to listen to any suggestion on the issue.

Following the completion of this consultation process the department will publish a summary of the views expressed during the consultation. This summary, along with all individual and organisational consultation responses, will be published on the DFP website and will inform the department’s next steps in this review process.

Reflecting on the announcement, Chairman of Federation of Small Businesses Northern Ireland, Wilfred Mitchell welcomed the news: “For FSB members in Northern Ireland, business rates are one of the major overheads after staff costs and rent. “Proportionately, small businesses pay more in rates than larger businesses and therefore, as it stands, the system is unfair.

“FSB Northern Ireland believes that there needs to be a wholesale rethink, not only on who pays what and how much is paid, but also on non-domestic rates as a concept.”

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