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£800m rise in London business rates

06 March 2017

A report by the Institute for Fiscal Studies shows a fall in revenue from business rates in the North of England, with London business rates rising by £800m.

The increase in funds raised by London councils will be used to fund the reducing rates from those in other areas, according to the BBC.

Changes to the business rates, which will come into effect on 1 April, are predicted to have considerable implications for FMs, particularly where businesses are sharing buildings.

Those able to prove their proportionate use of a building stand to gain from reductions in business rates, it was revealed during a discussion with the PFM Editorial Advisory Board.

Explaining the increased costs to the capital, one of the IFS report authors Neil Amin-Smith said the increased concentration on London "is part of a more general trend of greater reliance on the capital for revenues".

With the majority of businesses expecting reductions in their business rates, over 30% will receive demands for "very sharp rises", said the BBC.

This will see rises of over 40% for approximately 20% of businesses and most of these are located in South East England.

With the changes intended to be revenue neutral, London businesses are expected to rise by 11%, while those in the North of England will reduce by 10%.

Northern councils experiencing falls in their revenue will then be compensated by the local authorities which see their business rates income increased.

With 50% of business rates income paid to central government, the extra £800m raised by London will see £400m go to northern councils and the same amount paid to government.

However, gains from increased rates within new developments will be retained by London councils in the future.

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