Last minute U turn on business rates produces bureaucratic nightmare for firms

In a last-minute reprieve, Darling said that the rate rise, which applies only in England at present, would be scaled back to 2% this year, and that businesses could spread payments of the remaining 3% increase between 2010 and 2012.

The scheme will now allow business owners to defer about £600 million relating to 1.6 million properties, the Department for Communities and Local Government (DCLG) said. More than half of all councils have reported that businesses in their area are having difficulty meeting their business rate bills, and about 85 small businesses are failing every day as they grapple with slumping consumer demand and tighter credit conditions.

Jerry Schurder, rating expert for the Royal Institution of Chartered Surveyors and head of rating at the specialist surveyor Gerald Eve LLP, whose clients include 40% of the FTSE 100, said: "The deferral of part of the business rate increase is terrific news. But why, oh why, could this decision not have been made a few weeks ago before all the rates bills were issued? It is absurd that the deferral will not be granted automatically but that 1.6 million ratepayers will need to apply to their council to agree a revised payment plan - red tape madness."

Under the scheme, businesses will have to pay the 5% higher bills until the end of June, at which point they can apply to their local authority to defer 60% of the increase over the next two years. Businesses hit by the end of the 2005 transitional relief scheme will also be allowed to spread their payments.

Business leaders and local councils had been calling on the Government to back down on the rate rise given that RPI inflation, which reached 5% last September, the month that business rate increases are set, has now tumbled to 0%.

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