Hike in rates could cripple small businesses

posted by 4 years ago in News

When the Government announced a delay in the revaluation affecting business rates in 2015 many breathed a sigh of relief however, what would have been a headache then, is proving to be a migraine for some small businesses now.

In 2016-17 business rates are estimated to raise £29bn in total – which is around 4.5 per cent of the entire UK tax take. 1.8 million businesses are liable and, from April those with a rateable value of less than £12,000 will be entirely exempt from the tax.

The Federation of Small Businesses (FSB) has joined with 12 other major business groups and 4 professional groups to sign a letter opposing the Government changes. They estimate about 510,000 businesses face rates increases of up to 300 per cent.

Concerns have been raised by some shops and other businesses, particularly in London, that the revaluation will have a crippling effect on them when it comes into force in April. With this in mind, they’re calling for the Government to rethink the changes.

The Treasury has hit back at what it’s calling ‘scaremongering’ with the Chief Secretary David Gauke, insisting that no change or a fall in rates will be seen by the vast majority of businesses. The bill is expected to rise for a quarter of firms. He 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.”

Why is there particular concern about the impact on small businesses?

Larger companies with premises across the country will see rises and falls in different places which may well offset each other. By contrast, small independent businesses, particularly those in prosperous areas could struggle to cover the hike in business rates. The FSB warned that London was in “serious danger of losing its vital support system of micro and small businesses”. The retail TV celebrity Mary Portas has predicted that a third of independent shops could be killed off by the move paving way for more chains and less independent businesses on our high streets.

Head of Businesscomparison.com, Philip Brennan comments:

“The business rates hike poses a genuine threat to SMEs and, for some, it may prove to be insurmountable. Business rates will have changed significantly over the past seven years particularly in prosperous areas where the value of business properties has drastically increased. It is unfair and unrealistic to expect small business owners to be able to cover massive increases that have built over time. The Government has established a transitional relief system to help businesses affected by the biggest bill changes over the next 5 years. This is a step in the right direction, however it is crucial that this is managed effectively.

“Small business owners face daily challenges of managing cash flow and getting access to finance to sustain and grow their enterprises. Add Brexit into the mix and it is an uncertain time. Small businesses need support and stability in the current climate. The rate hike may prove a tipping point for some. The Government needs keep pushing to make sure that large businesses and online companies, whatever their size, are all paying their fair share in taxes. It is important that all businesses are competing on a fair playing field.”