The news follows stark warnings from the Conservatives that pubs would receive “bombshell” bills under new rates revaluations.
A snap survey on the Morning Advertiser’s website found 21.7% of licensees said their rateable value had more than doubled. Nearly one third — 30.4% — said it had risen between 41% and 100%. However, 13% said it had stayed the same, while 8.6% saw it fall by up to 40%.
Geoff Holland of the Holly Bush at Salt, Staffordshire, said his rateable value has increased 114%, from £19,885 to £42,680.
He said he had increased his turnover, and called the “punitive” hike a “personal tax”, which penalised success. “I would have to lay off two full-timers or put my prices up to be able to afford my business rates.”
Another unnamed licensee doubled his turnover and said his rateable value had jumped by 142%, from £22,650 to £54,750.
He currently pays £9,800 per year. He has been told by consultants that due to transitional relief, he could expect to pay £12,300 in year one, £14,800 in year two, £18,100 in year three, £23,100 in year four and £24,800 in year five.
He called the increase “horrendous”, adding he would consider whether to renew his tenancy.
John Chadwick, freeholder at the Arkwright Arms in Chesterfield, Derbyshire, said his rateable value has doubled from £19,250 to £38,500.
Turnover has only marginally increased and he hasn’t made any other changes to the business. “We haven’t increased our prices for 18 months, but if this isn’t resolved, I’ll have to impose severe price increases.”
Rating expert and trade accountant David Jones branded business rates an “unscientific tax”.
He said: “You can never find out how they do it. We know what VAT and capital allowances are, and we know business rates are 70% based on turnover, but it’s an absolute nightmare, a most unfair tax.”
Business rates are assessed according to the rental value of a property, which is affected by trading levels.
Levels are recalculated every five years, and new bills will be mailed out in April 2010. Pubs were revalued in April 2008, and the latest rateable values for pubs are available now online. Copies will arrive from the Valuation Office Agency this month.
Retail Week - Nicola Harrison - 01 October 2009
Retailers get business rates revaluation
Retailers are able to discover how much they will be charged in business rates today after the Government revealed its revaluation rates.
The Valuation Office is letting businesses in England know their new rateable values ahead of bills being issued next March. The rates come into affect in April.
Property consultant GVA Grimley has warned businesses must prepare for a “major hike” in business rate bills.
It said occupiers will be “hit hard” as well as any landlords with vacant properties.
GVA Grimley director Denise Trollope said: “The impending business rate increases will have a major effect on businesses. For this reason it is essential all businesses react appropriately to avoid a painful blow to balance sheets.
“Our research suggests increases will range from a low of 5% for small properties or 12.5% for large properties in the first year (2010/11) to a high of 15% for small properties to 25% for large properties in the fifth year (2014/15).”
London Councils warned that the Government’s revaluation of business rates would prove “hugely damaging” to businesses in the capital as they tried to recover from the impact of the recession.
The revaluation has been slammed by retailers as unfair, as the agreed figure is based on property values in April 2008 – when they were at their peak. Since then they have plummeted.
Jennifer Rigby, Property Week – 27 July 2009
Business rates revaluation makes britain most taxed property economy in Europe.
Britain is the most heavily taxed property economy in Europe and is set to get worse as a result of the business rates revaluation, according to research from Lambert Smith Hampton.
The business rate increase due to come in over the summer could be up to 30% in some cases, LSH said.
Rating director Richard Wackett said: ‘The tax hike comes at a difficult time for the UK property market, which is still suffering as the recession continues to place downward pressure on rents and capital values.
‘Increases in business rates of between 20 to 30 percent across the UK will be extremely painful to bear for many firms where cash flow is already very tight, and despite a phasing regime.’
The rise is the result of the five yearly rate revaluation by the Valuation Office Agency, which were worked out before the recession hit. LSH said that some businesses in the north-west face a 30% increase within 2 years. However there will be a transitional mechanism provided by the government to protect businesses from large yearly increases.
The tax rise comes into place in April 2010, six months after the notification in October this year, and it is in this six month window that businesses need to appeal any anomalies or inaccuracies.
Wackett said: ‘Rises within the 2010 Revaluation will be unavoidable but proactive businesses could mitigate some costs if they act quickly and seek professional advice when they receive notification post summer.’
Latest VOA statistics suggest that the 1.8m properties due to be re-valued will have a total rateable value of more than £51.5bn, from which the government will be hoping to receive around £22bn in tax revenue a year – 5% of its overall tax receipts.
July 17th 2009 - Retail Week
Government considers business rates relief fund.
The Government has launched a consultation process on a £2bn relief scheme for businesses, including retailers, affected by next year’s business rates revaluation.
The relief package, from the Department of Communities and Local Government (DCLG), is intended to mitigate losses for those likely to suffer a rise in business rates when revaluation comes into effect in phases next year.
The Government claims high street retailers will be largely unaffected by the revaluation, but large grocers are likely to see an increase.
The revaluation has been slammed by retailers as unfair, as the agreed figure is based on a period when property values were at their peak, since when they have dived.
Travis Perkins group property director Martin Meech said: “It’s right to bring in a phased increase like this, but the general view is that the more sensible thing to do would be to defer the increase until we’re in more normal circumstances.”
The DCLG is asking for feedback about how the relief package, which will be funded by the redistribution of money collected from business rates, could be best put into practice.
April 1, 2009 - The Times.
Alistair Darling backs down over 5% business rate rise.
Alistair Darling bowed to pressure last night and cut the planned 5 per cent rise in business rates that was threatening to cripple many small firms.
In a last-minute reprieve, the Chancellor said that the rate rise, which applies only in England at present, would be scaled back to 2 per cent this year, and that businesses could spread payments of the remaining 3 per cent increase between 2010 and 2012.
The Conservatives claimed victory over the climbdown by Alistair Darling. Caroline Spelman, the shadow Local Government & Communities Secretary, said: “We welcome this U-turn because in large part it follows the campaign we have mounted asking the Government to look again at the impact business rate increases will have at this time of recession.”
The scheme will now allow business owners to defer about £600 million relating to 1.6 million properties, the Department for Communities and Local Government (DCLG) said. More than half of all councils have reported that businesses in their area are having difficulty meeting their business rate bills, and about 85 small businesses are failing every day as they grapple with slumping consumer demand and tighter credit conditions.
Kevin Hoctor, the head of policy for the British Chambers of Commerce, said: “We asked the Government to freeze the business rate increase because RPI inflation is at zero per cent. Staggering the cost is still an increase and it will be complex. Businesses will still be hit at a time when they have restricted cashflow and growth.”
Jerry Schurder, rating expert for the Royal Institution of Chartered Surveyors and head of rating at the specialist surveyor Gerald Eve LLP, whose clients include 40 per cent of the FTSE 100, said: “The deferral of part of the business rate increase is terrific news. But why, oh why, could this decision not have been made a few weeks ago before all the rates bills were issued? It is absurd that the deferral will not be granted automatically but that 1.6 million ratepayers will need to apply to their council to agree a revised payment plan — red tape madness.”
Under the scheme, businesses will have to pay the 5 per cent higher bills until the end of June, at which point they can apply to their local authority to defer 60 per cent of the increase over the next two years. Businesses hit by the end of the 2005 transitional relief scheme will also be allowed to spread their payments.
Business leaders and local councils had been calling on the Government to back down on the rate rise given that RPI inflation, which reached 5 per cent last September, the month that business rate increases are set, has now tumbled to 0 per cent.
Clinton Cards, the struggling retailer which has a multimillion-pound rates bill on its 1,000 stores, said that the move was a step in the right direction. Barry Hartog, its commercial director, said: “A 5 per cent increase in rates while your revenue isn’t increasing seemed perverse to us.”
Ian Cheshire, the chief executive of Kingfisher, which owns B&Q, said: “Ideally, we would have liked to see a reduction rather than a deferral, but this is still a welcome change.”
Richard Lambert, the Director-General of the CBI, said: “We have been campaigning for a two-year freeze on business rates, instead of the 5 per cent rise that is still being applied over time.”
Councillor Margaret Eaton, chairman of the Local Government Association, said: “This will help a large number of businesses struggling in the bleak economic climate.”
23 Mar 2009
Firms face 'unacceptable' jump in rates.
The LGA, is warning that some firms are set to be hit by rate bills that will be doubling or tripling because a programme of Government rate relief is coming to an end.
Business rates are reassessed every five years by the Government and firms that see sharply rising bills are eligible for transitional relief totalling £100m a year. However, this scheme is due to come to an end across the country from 1 April, affecting thousands of firms that have been paying reduced bills for years and in some cases for decades.
The LGA wants to see an extension of the relief and a 'radical overhaul' of the tax breaks system so eligible businesses automatically receive breaks without having to apply for them.
The group's research shows that more than half of councils (56%) are reporting that businesses in thier area are struggling to pay rates.
Cllr Margaret Eaton, Chairman of the LGA, said: 'Bills are starting to drop on businesses’ mats and up and down the country and some are telling councils that they simply won’t be able to pay. It's unacceptable that some businesses could see their rates bills double or even triple.
'It’s clear that a decision about ending this relief was made whilst 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.
'The importance of small businesses to a thriving local economy cannot be underestimated, stimulating employment and keeping money flowing into local areas. Independent retailers such as newsagents, hairdressers and corner shops are the lifeblood of local areas.'
Brian Connell, Cabinet Member for Communities and Economic Development at Westminster City Council, said: 'It's completely unjust and illogical to burden businesses with a double inflation rise in business rates in the midst of an economic crisis which is threatening their very existence.
'As each week passes the jobless total is rising and more firms are going bust. In Westminster we collect more than £1billion in business rates on behalf of central Government, and we can see first hand the pressures facing our 47,000 businesses.
'These entrepreneurs form the life-blood of the economy, and to penalise them due to a statistical quirk based on figures half a year out of date is unfair.
'Businesses will be getting their new demands from the start of April, so the Government still has around week to do the right thing and base these bills on current inflation levels."
23 Mar 2009
Government triggers business rates mess at the worst possible moment.
One business in Guildford has received a nasty shock. Its annual business rates bill has just increased by 1,000pc. How come? It took some digging to get to the bottom of this obvious absurdity but apparently thousands of businesses face a similar bombshell. Put simply, many have not been paying the right rates for decades.
The mess dates back to the Conservative Government's decision to nationalise business rates in 1990, following years of rates being used as a political football. This exercise saw a relatively thorough revaluation of business premises, many of which had been undervalued for years. It led to some eye-watering increases in rates. In the case of the business in Guildford, the rateable value of its premises rose from £10 in 1989 to £7,900 in 1990.
To ease the pain of the tax hike, a transitional relief scheme was created that capped the annual increase in rates over a five-year period.
The caps of between 5pc and 15pc for small businesses and 12.5pc and 25pc for large, that ran for the 1995 and 2000 revaluations, were often insufficient to ensure that by the end of the five years the right amount of tax was paid on the premise.
As the relief was paid for by capping any rate reductions to premises, the scheme was apparently largely self-funding.
The problem was that when councils calculated the rates bills at the start of each revaluation period, they used the previous year's bill as the starting point, not the amount that the business should actually have paid.
No one in Whitehall seems to have raised any alarm bells. Until, that is, some bright spark decided to reduce the transition period from five years to four in 2004.
The idea was waved through by business groups and local authorities, which were consulted.
And then all went quiet, until along came a recession.
When councils started calculating this year's rates bills, some, to their credit, had a mild, "I've still got a defined benefit pension" sort of heart attack. They realised sending out bills to thousands of businesses that demanded inflation-busting tax rises would not go down particularly well.
It has emerged that this year, of all years, would be the first time that tax liabilities, some dating back to 1990, would crystallise. It means that in 2009, for the first time in 19 years, there is no cap on the amount that a business rates bill can rise.
Steve White, head of revenue and payments at Guildford Borough Council, is one local government officer who has had the decency to include an explanatory letter with the bills and offer to help reduce them if he can. He thinks the business facing a 1,000pc increase is an extreme case but not unique.
Guildford has others suffering 500pc and 200pc rises – in total, 272 out of a 4,600-strong business community will see rates rise by more than the already controversial 5pc.
If Guildford's experience is repeated across the country then 29,000 businesses could be affected. The timing could not be worse. Business rates are one of those fixed (and rising costs) that retailers in particular struggle with during a downturn.
There's very little you can do to reduce the bill, save for an appeal to the Valuation's Office or a move to a cheaper part of town if your lease is up for renewal.
The correction in rates bills also comes on top of other rates rises, not least the planned 5pc rise linked to last September's rate of inflation rather than today's virtually inflation-free trading environment.
In an attempt to deflect this criticism, the Government may make the woefully under-subscribed small business rate relief scheme in England an automatic right rather than one that is granted on request.
More than £200m a year in this relief goes begging – worth around £1,100 to each eligible business – because most are unaware of the scheme.
But this welcome change should not ease the pressure on the Government to halt its slide into taxing businesses more heavily just when many are struggling to survive.
Given the huge sums of public money spent when businesses fail and jobs are lost, such tax rises make no sense, even if they are politically expedient.
March 18 2009
Small companies in London are to be hit with a business rates “double whammy” that could force them to pay up to £500 extra tax.
Leaders of London councils on Tuesday urged Alistair Darling to step in to prevent the rise at a time when small businesses were already struggling with the recession and credit crunch.
The rise is the result of a 5 per cent increase to the figure used to calculate business rates and the ending of transitional relief.
It comes because the government is using September’s inflation rate figure of 5 per cent as a guide in setting rates for the coming year. Inflation rates have fallen steadily since then, however, down to 2.4 per cent by January, which the council leaders claim gives an artificially large increase.
Business rates, which are paid to the government but collected by local authorities, are calculated using a figure set by ministers which is then multiplied by a property’s rateable value. The figure changes each year with inflation.
In a letter to the chancellor, seen by the FT, Merrick Cockell, London Councils’ chairman, says September’s RPIX inflation figure was “uncharacteristically high”.
He writes: “The resulting increase in the multiplier from using this anomalous figure will have serious implications for the financial well-being of businesses, particularly small businesses, in the capital.”
The council leaders have called on the chancellor to lower the figure used to calculate rates, increase the empty property exemption threshold in line with the capital’s high property values, and explore ways to promote take-up of the small business rate relief scheme.
10 March 2009
CBI urges freeze in business rates and lambasts bill.
The Confederation of British Industry (CBI) has called for a two-year freeze on increases in business rates and demanded that "urgent amendments" are made to the controversial Business Rates Supplement Bill, warning that its implementation could lead to companies going bust.
The Confederation of British Industry (CBI) has called for a two-year freeze on increases in business rates and demanded that "urgent amendments" are made to the controversial Business Rates Supplement Bill, warning that its implementation could lead to companies going bust.
Both next month's rise and the proposed Supplement Bill have led to around two dozen retail chief executives – including Arcadia's Sir Philip Green and Debenhams' Rob Templeman – to lobby the Government for the tax increases to be scrapped or altered.
The British Retail Consortium, the retail trade body, has also been vocal in its opposition. The CBI argues that the supplementary taxes will cost businesses £800m.
John Cridland, the deputy director-general of the CBI, said: "These extra taxes on business could harm local economies by placing extra financial demands on firms when they can least afford it. They could make the difference between companies surviving the downturn or going to the wall."
The CBI has called for amendment to the bill. It said that businesses should get a vote to approve or reject proposed tax supplements to pay for new infrastructure projects. The body says that this would "help avoid white elephant projects that business does not actually need", as well as save money and cut waste.
"The Business Rates Supplements Bill is designed to help fund projects that benefit local economies, but may backfire in its present form. It risks placing extra burdens on firms that are fighting for survival, and could lead to more firms going bust," said Mr Cridland.
As it stands, the bill includes some safeguards to ensure that supplements are levied for genuine "economic development projects". It will also enable businesses to have a vote where a supplement constitutes one third or more of a project's cost.
However the CBI "remains concerned" that there will be ambiguity about which forms of infrastructure a supplement may fund.
Both next month's rise and the proposed Supplement Bill have led to around two dozen retail chief executives, including Arcadia's Sir Philip Green, to lobby the Government for the tax increases to be scrapped or altered.
March 8, 2009
Retailers’ fury over business rates rise.
BRITAIN’s biggest retailers are heading for a showdown with chancellor Alistair Darling about plans to raise business rates next month by more than £1 billion. They claim the move will tip struggling companies into insolvency and cost thousands of jobs.
Sir Philip Green, the owner of Topshop and BHS, met ministers John Healey and Angela Eagle last Wednesday to seek postponement or cancellation of the proposed 5% rate rise.
The rise is based on the retail prices index from last September. This has since dropped dramatically and is even forecast to turn negative later this year as the country slides deeper into recession.
Green has the backing of 80% of the country’s biggest retailers, including Tesco, Marks & Spencer, Asda, New Look, Debenhams and B&Q.
However, Darling insisted in a letter sent to Retail Week magazine on Tuesday that there were no plans to amend the system for 2009-10. Freezing business rates for 2009-10 would cost almost £1 billion.
Green told The Sunday Times: “I did have a meeting on Wednesday concerning the proposed April 2009 and 2010 rate increases. But I am very surprised to learn based on that meeting that a letter from Alistair Darling had already been written on Tuesday prior to my meeting.I had been anticipating further dialogue.”
It is thought retailers are furious that Healey and Eagle agreed to a meeting when Darling was seemingly intractable.
The industry is considering how it can fight the rise, which it wants deferred for 12 months or scrapped.
Phil Wrigley, chairman of New Look, the fashion chain, said: “When the government behaves in a random and selective fashion there has to be a debate, and we have to make clear the damage it is doing to the economy and to jobs. At best it is opportunistic – at worst it feels like a squeeze that is close to theft.”
Wrigley added: “It is very strange that the government is taking money deliberately from some industries and giving it away to others.”
Lucy Neville-Rolfe, the corporate and legal affairs director at Tesco, described the rate rise as a “tax on jobs”. “It is essential the rate rise is delayed if we are to head off more insolvencies in retailing,” she warned.
Ian Cheshire, chief executive of B&Q’s owner Kingfisher, said: “This is not the time to be increasing the tax burden on retailers – the casualties will come next year.”
The rates row could force retailers and landlords to unite against the government for the first time. Landlords are furious the government is making them pay business rates on empty properties.
The increase in business rates comes at the worst possible time for retailers. Sales are sliding and a string of high-street names, including Woolworths, Zavvi and MFI, have already gone to the wall.
This year it is estimated the government will collect £24 billion in business rates and retailers will pay a quarter of that.
March 6 2009
Spelman pledges to cut business rates for small shops and firms.
Caroline Spelman has pledged to cut taxes and paperwork for small shops and small firms to help them survive the recession.
The Shadow Communities & Local Government Secretary promised a Conservative Government would ensure small business rate relief was applied automatically to firms, rather than businesses having to claim it themselves.
Currently, firms have to fill out time-consuming paperwork to claim rate relief, despite the fact that Whitehall’s tax inspectors know precisely which firms would be eligible. The Local Government Association has estimated that less than half of the 870,000 firms eligible for the rebate have claimed the money.
Caroline stressed, “Gordon Brown is making it difficult for small firms to claim the tax relief to which they are entitled. He is compounding their misery by finding new ways to drive up business rates by stealth.”
And she promised, “Conservatives would ensure that small firms automatically receive rate relief, cutting their paperwork and their tax bills and giving many of them a fighting chance to stay afloat (during the recession).”
The Conservative MP, Peter Luff, has put forward a Private Members' Bill to get rate relief applied automatically for small firms.
12th November 2008
Tesco boss calls for business rate rises to be shelved.
Tesco boss Sir Terry Leahy yesterday issued a plea for a cut in the rates levied on business properties.
He called for an overhaul of the way business rates are calculated. And he asked for the Government to postpone a revaluation of commercial property scheduled for 2010.
Leahy also suggested tax breaks for companies that invest in deprived communities and energy-efficient buildings.
His plea comes as politicians engage in a war of words over who can deliver the most ambitious tax cuts. With the economy plunging into recession, Prime Minister Gordon Brown has signalled he is ready to borrow more to fund relief for businesses.
Leahy said: 'Make no mistake, we are all facing a considerable challenge in the months ahead as we batten down the hatches. We need government to be on the side of all businesses - small and large - so that
we can continue to create jobs and invest."
Leahy's demands for changes to business rates focus on the amount by which the levy rises each year. Normally, increases are linked to general inflation and are set each September for implementation the following year.
Speaking at the British Council of Shopping Centres conference in Liverpool, Leahy said yesterday that next year's rise will be unaffordable for businesses and that the link between increases and inflation should be cut.
23rd October 2008
Small business leaders demand emergency £1bn fund to help them through financial crisis.
