The Association of Accounting Technicians (AAT) has urged the government to ‘fix the broken business rates system’.
The AAT advocates a complete overhaul of the system, stating that it is currently ‘unfit for purpose’. According to the professional body, the retail sector is ‘suffering significant problems’ as a result of rising business rates.
It has also suggested that, by 2023/24, the business rates system will have cost taxpayers £13 billion.
The AAT has outlined a handful of recommendations, which are designed to help tackle some of the ‘immediate problems’. These include carrying out revaluations annually, instead of every three years; removing plant and machinery from business rates calculations; and establishing a ‘cross-party, consultative approach’ to agreeing a fairer, simpler alternative to business rates.
‘The system is creaking at the seams – it’s a 20th century system trying to deal with 21st century problems, and needs wholesale reform,’ said Phil Hall, Head of Public Affairs and Public Policy at the AAT.
‘A cross-party consensus on reform would maximise the chances of long-term success and recognise that irrespective of political persuasion, most politicians genuinely want what’s best for businesses, large and small. An outcome that allows businesses to thrive is generally good for employment, consumers and the British economy.’
The Treasury Committee has launched an inquiry into the UK’s business rates system, in order to assess the impact of business rates on firms.
The Committee intends to examine how changes in government policy have altered the business rates system. It will also analyse ‘how the current business rates system is operating’.
Additionally, the inquiry will assess the ‘economic justification’ for a property-based business tax, taking into account the impact of business rates on rental prices and property prices. The Treasury Committee also stated that it will consider alternatives to property-based business taxes, such as the proposed Digital Services Tax.
The Federation of Small Businesses (FSB) welcomed the inquiry. Mike Cherry, its National Chairman, said: ‘The FSB has worked with the government to secure a set of reforms to business rates since 2016 – doubling small business rate relief, linking annual rises to CPI, transitional relief, and now a high streets discount.
‘The tax, however, remains regressive, and not linked to ability to pay.
‘We welcome the inquiry as the next step in building on the recent work to help, and sort out a modern tax system that balances the need to fund public services with protecting our vibrant 5.6 million-strong small business community.’
Business Secretary Greg Clark has suggested that business rates ‘could be changed’ in order to help high street retailers in the UK.
Experts have stated that rising business rates, increasing staff costs and the rise in popularity of online shopping have created a so-called ‘perfect storm’ for UK retailers.
Speaking at the Conservative party conference, Mr Clark said that the Treasury is carrying out a review of business rates, and that he believes that high street retailers ‘make a big contribution to the community, and to villages, towns and cities’.
Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), welcomed Mr Clark’s statements, saying: ‘Competition from online retailers has left many high street firms struggling and confidence among small businesses in our high streets is falling. Without action on business rates, we will continue to see high street retailers forced to close.’
Business rates now rise by the CPI, rather than the RPI. This change was announced in the 2017 Autumn Budget by Chancellor Philip Hammond. In addition, business rates revaluations are set to take place every three years, rather than every five, starting after the next revaluation, currently due in 2021.
Councils across England are being urged to distribute quickly the funds allocated for firms hit by the recent hike in business rates.
The call came from the Federation of Small Businesses (FSB) and follows the controversial revaluation of business rates, which took effect on 1 April.
Last month the Chancellor Philip Hammond announced a range of measures intended to help those worst hit by the rates increase, which included providing English local authorities with funding to support £300m of discretionary relief.
However, critics have warned of potential chaos and uncertainty as many businesses do not yet know whether they will benefit from the relief fund.
Commenting, FSB National Chairman, Mike Cherry, said: ‘The promise of a £300m relief fund for local authorities to help those hardest hit is welcome. But we urge councils to make small firms aware of their allocation and finalise the mechanism for distributing it as soon as possible.
‘What we have to remember is that bills have already landed. That being the case, any firm that pays their full business rates without realising they qualify for relief should have their overpayment returned automatically, and swiftly.’
It is thought that around 510,000 businesses have seen a rise in their rates bills, with some firms expected to incur an increase of up to 50%.
Responding to the concerns, the government said it was working with local authorities to ensure the extra support ‘gets to businesses as soon as possible’.
In the week before his first Budget, the Federation of Small Businesses (FSB) continues to lobby Chancellor Philip Hammond on the controversial issue of business rates.
The FSB has released a survey, which found that 36% of small firms expect to see their business rates increase when the re-evaluated rates come into effect from 1 April. Of those, 44% of FSB members say that their business rates will eventually rise by more than £1,000 per annum, while 21% will see their annual bill increase by more than 40%.
According to the FSB, the business rates rise could have significant consequences for the growth of affected small businesses. It has claimed that a ‘significant proportion of small businesses across Britain are preparing to reduce investment and staff costs once business rates rise’. 54% of firms facing a rise expect profits to fall, while 55% plan to reduce, postpone or cancel investment in their business, the survey revealed.
Mike Cherry, National Chairman of the FSB, said: ‘The business rates system is an unfair, regressive tax which hits small firms before they’ve had the chance to make their first £1 in turnover, let alone profit. Our survey shows the delayed revaluation harms too many small businesses who face unsustainable and unaffordable rises.
‘The solution is for the Chancellor to use his Spring Budget to announce a cross-party commission to propose measures for a replacement business tax system linked fairly to the ability to pay.’
The Chancellor will present the 2017 Spring Budget on Wednesday 8 March. We will be keeping you up-to-date on the key announcements, so please visit our website regularly.
Ahead of his first Budget speech on 8 March, Chancellor Philip Hammond has told Conservative MPs that he is ‘listening’ to concerns about an imminent re-evaluation of business rates.
At a recent meeting of the Conservative backbench 1922 Committee in Westminster, a number of MPs raised concerns about businesses in their constituencies facing significantly increased costs when the new rates come into effect in England on 1 April. Revaluation processes are also underway in Scotland and Wales, with Northern Ireland having carried out a revaluation in 2015.
Conservative Andrew Bridgen, the MP for the North West Leicestershire constituency, has said that some businesses in his area are facing ‘eye-watering’ rises, with one firm’s monthly rates increasing from £50 to £700. Along with others, he has called for Mr Hammond to take action on business rates in the Budget to avoid high street business closures and potential damage to the economy.
However, a spokesperson for the Department for Communities and Local Government insisted the rate changes were ‘fairer’ and ‘will mean businesses in 80% of council areas will see an average fall in their business rates bills due to revaluation before inflation’.
Meanwhile, the Federation of Small Businesses (FSB) and Camden Town Unlimited Business Improvement District have called for the Chancellor to make a special London business rate concession.
Their survey of businesses in London found that the average micro business (businesses with less than ten employees) will be paying £17,000 in business rates in April 2017, and that 74% of respondents said that business rates was the single biggest issue affecting their business.
The FSB and Camden Town Unlimited Business Improvement District are calling for the government to create an increased inner and outer London Small Business Rate Relief (SBRR) threshold.
A new Government tool allows individuals in England and Wales who pay business rates to easily check their new draft rateable value, and, from this, get an estimate of what their business rates will be from April 2017.
The Government’s Valuation Office Agency (VOA) recently revalued all 1.96 million non-domestic properties in England and Wales. These new rateable values are based on the rental value of properties on 1 April 2015, and will be used to calculate business rate bills from 1 April 2017.
The news has been welcomed by business groups, but some have also raised concerns about the new system since certain businesses could face a significant hike in their rate.
Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘This review has been delayed by two years and means small businesses have been paying rates based on 2008 valuations which are now out of date.
‘Many businesses across the country will be getting some relief from years of overpayment or see their rates remain steady. In other areas, there will be a big jump between the old valuation and the new one. To avoid such big discrepancies in payments, we believe more frequent valuations are necessary.’
Transitional relief plans recently announced by the Government include spreading the tapering over five years and having a new band for medium businesses.
The new VOA tool can be found here: www.gov.uk/correct-your-business-rates
Tools for calculating business rates in Scotland and Northern Ireland can be found on the relevant Government websites.