The Federation of Small Businesses (FSB) has issued warnings regarding the rises to business rates due to come into place after April.
Business rates are a tax on commercial properties. It is one of the Treasury’s biggest sources of income, totalling £29bn last year. A revaluation every five years is meant to ensure that the tax burdens of businesses are in line with the economy.
What’s changing?
Business rates are changing because they are based on property values. Revaluation of properties usually takes place every five years, meaning that rates can fluctuate. However, the government delayed the last one by two years. This means that the rates this time are going to show a more drastic change from the last revaluation.
The FSB and trade body Camden Town Unlimited conducted a survey and found almost three-quarters (74%) of small firms have said that business rates were the most important issue they face. This was rated higher than economic uncertainty and recruitment problems.
The FSB said that London was in “serious danger of losing its vital support system of micro and small businesses”. Micro businesses, those employing fewer than ten people, will be expected to pay £17,000 on average after April.
Four out of ten businesses also say they expect a rate increase of at least 20%. Three in ten said they were unsure about what to expect after April.
Widespread criticism
The British Chambers of Commerce and the Institute of Directors have already joined in criticising the plans and call on the government to overhaul the tax.
The FSB and Camden Town Unlimited have suggested that the threshold be increased so that smaller firms could avoid a big rate increase.
FSB London chair, Sue Terpilowski said: “The business attraction of London is that it has a strong ecosystem of support services from the micro and small business community. Some of these businesses are the ones that become high-growth companies from a standing start, often in the hi-tech sectors.
“We must ensure that this support system remains in place to keep the UK economy and the London economy thriving. We need to realise that the hard costs of operating a business in the capital are starting to outweigh the benefits, which simply does not make economic sense – and so tackling these burdens at the spring budget is critical.”
Accountants have also weighed in with their criticisms. Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants (ACCA) had this to say:
“The government should ensure that this is not introduced at the expense of the competitiveness of UK plc as a place to work and to locate a business. The system also needs to take account of fairness when some high-street shops will be hit by hikes of over 400% on current rates, while online retailers will see rates cut in many instances.
“For many of the productivity-boosting [SMEs] up and down the country, increases will eat into disposable income which could better be spent on investment, recruitment or research and development.
“The government should revisit these proposals and carefully consider if the revaluation is the best way to raise revenue from the UK’s thriving small and medium-sized businesses in an era of high uncertainty.”
Just scaremongering?
The government has accused critics of the changes of “scaremongering” and pointed out that three-quarters of businesses will see no change in their rates or even have them reduced.
Chief Secretary to the Treasury, David Gauke has said that: “Far from the picture painted by scaremongering ratings agents, nearly three-quarters of businesses will 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.”
Are you going to be affected by the changes in business rates? Do you think the plans should be halted? Let us know your thoughts in the comments.