Small firms suffer £100m blow with increase in business rates

Published 31st Mar 2009

Tens of thousands of family-run firms will be hit in a £100million tax grab this week when business rate relief is abolished.

The move comes on top of an inflation-busting 5.2 per cent increase in the rate, which will cost companies another £1billion.

In some cases, the combined effect will see annual bills more than treble for retailers and small firms which are already suffering from a slump in consumer demand, credit freezes and higher bank charges.

The rate rise is so high because it is linked to the level of the Retail Prices Index last September. The RPI has since dropped to zero and is even forecast to be negative later this year as the recession takes hold.

But despite warnings of firms closing and of job losses, ministers are refusing to change or delay the rise.

From next month, businesses will also face extra costs and red tape from an extension of flexible working rights and an increase in statutory holiday entitlement from 24 days to 28.

In another blow, transitional relief from a 2005 revaluation of commercial properties also expires tomorrow, pushing up bills even further.

Local authorities, fearing the change will lead to boarded-up high streets, have said they want relief to continue.

Large firms have lined up to criticise the Government's refusal to waive the rate increase

The Government is also pushing ahead with plans to let councils impose supplementary taxes on businesses to help pay for local infrastructure projects.

The move, expected to cost another £800million, has been condemned by retail chiefs including Debenhams chief executive Rob Templeman, Ian Cheshire, boss of Kingfisher, which owns B&Q, and Sir Philip Green, whose Arcadia company owns Topshop, Burton and Dorothy Perkins.

The Federation of Small Businesses said: 'This is going to hurt a number of businesses at a time they can least afford it.

'The Government has got to pull something out of the hat otherwise we will have more ghost-ridden high streets.'

Margaret Eaton, chairman of the Local Government Association, said: 'It is unacceptable that some businesses could see rates bills double or even triple.

'It is clear that a decision about ending this relief was made while the economy was still booming and it was thought that businesses would be able to cope.

'In the new environment, it's just not realistic to expect many businesses to deal with this sharp rise in their bills.'

Tory spokeswoman Justine Greening said: 'The Government needs to take a close look at all the increases.

'At the moment it really looks like the way they are approaching business rates is a road to ruin, not just for businesses but for the communities they serve.'
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After rent and staff, business rates are the third biggest cost for many retailers.

They are the equivalent of council tax for companies which occupy non-domestic properties and are based on the rateable value of the premises, roughly the same as a year's rent.

Companies in premises with a rateable value under £15,000 - £21,500 in London - can claim a rebate of up to 50 per cent but it is not applied automatically and some firms are put off by having to fill out a form to claim.

The Department for Communities and Local Government said: 'Businesses have had four years of transitional relief to phase up to their full payment and have received considerable benefit from the relief scheme'.

Source: ' Daily Mail '

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