What are business rates?
Business rates are a tax on non-domestic or commercial properties in Britain.
The principles behind the charge originated in the 1601 Poor Relief Act, which
charged property owners a tax to help support the poor. It has become one of
the Treasury’s biggest sources of income, bringing in nearly £29bn last year.
Tax is calculated by the rental value of commercial property and the annual rate
of inflation. The tax goes towards covering the cost of services provided by local
authorities and the emergency services.
FSB Data on Business Rates at the Spring Budget
The Federation of Small Businesses (FSB) has conducted a survey alerting
that London was in “serious danger of losing its vital support system of micro
and small businesses”. The average micro business employs fewer than 10
people, they will have to pay £17,000 to cover business rates from April.
The survey found that 74% of businesses consider rates to be the single biggest
issue affecting them, followed by 36% who mentioned economic uncertainty,
and, one-third who said that the difficulty with recruitment.
“The new business rates will drive firms out of London, force some
businesses to cut staff or close down altogether,” said Simon Pitkeathley,
the chief executive of Camden Town Unlimited, who represents more
than 300 businesses in the area.
Interest rates impact more than the cost of running a business, they signal a
change in the behaviour of the consumers that small businesses rely on most.
Four in ten (40%) businesses who are paying business rates told FSB that they
expect to see an increase of above 20% in their Business Rates; whilst three in
ten (31%) are simply unsure of what the change will mean to their business.
The change in business rates payments from April is down to the reassessment of
property in Britain. It is supposed to take place every five years, however, the
previous reassessment was delayed by the government in 2015 for two years,
making the revised bills more noticeable. The reassessment is likely to benefit
struggling high streets in northern England. London, however, will record an
increase of around £9bn over the next five years.
David Gauke, chief secretary to the Treasury, said: “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.”
However, accountants urged the government to reassess the rates system because
of the uncertainty caused.
Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified
Accountants (ACCA), said: “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.”
Business that will be effected
The worst affected is Queen Elizabeth in Birmingham, the rates bill will more
than double to £6.9m a year. A £1.4bn (33%) rise in business rates for offices in
the City of London will weaken the Square Mile’s drive to continue being a key
financial centre in Europe after Brexit. The Bank of England faces an increase of
more than £1.5m a year on its Threadneedle Street headquarters.
Sports Direct will save almost £900,000 in business rates over the next five years
on its warehouse in Shirebrook, Derbyshire, compared to a Victorian workhouse.
This saving will nearly cover the £1 million the company owes in back pay to
thousands of employees after admitting it had paid them less than the minimum
Private hospitals have managed better than NHS hospitals in the government’s
reassessment. Their rates have increased by 9.6% compared with an extra 19.8%
for NHS hospitals. The O2 London will suffer a rise in its business rates of more
than £9bn over the next five years. The capital’s landmarks are among the buildings
most affected, with the O2 set for a 142% rise.
This survey was conducted between 2 February and 14 February and included
responses from 129 businesses. – Read the full statement