- Businesses to pay a total of £400m more in rates in 2016/17.
- The end of retail discounts to cost businesses £284m.
- The burden of business rates continues as rates rise by 20% over the last 6 years compared to an economy that’s only grown 12%.
- 92% of Business owners don’t believe the Government will demonstrate its pro-business credentials by easing the burden of business rates.
Businesses in England are preparing for yet another business rates squeeze, as the tax rate levied on commercial property is set to hit its highest level ever, according to CVS surveyors, the business rates specialist. From 1 April 2016, the ‘uniform business rate’ will hit a landmark 49.7 pence in the pound – this will be its highest level since its introduction in 1990. The increase will cost businesses an extra £188 million in rates in 2016/17.
The Government is also now bringing an end to business rates discounts for small retail properties, which will see £284 million added to bills this year. Together, these additions will see some £400 million added to rates bills overall in 2016/17 at a time when frustration with the tax is widespread and pushing many businesses close to breaking point.
In fact, a new survey commissioned by CVS surveyors, which spoke to 250 UK business owners, reveals over a quarter (26%) of business owners reported that the cost of running their business is making them consider other forms of employment, or are having to make staff redundant. A further one in five said that their business rates represent one of their biggest business costs.
Further analysis shows there is little faith in the Government to work in their interest. Almost all of business owners (92%) think that the Government won’t demonstrate its pro-business credentials by easing the burden of business rates and the same number believe that the Government won’t utilise the long awaited business rates strategic review as a way to make business rates easier to understand.
Moreover, research from CVS business rates shows that the Government’s use of out-dated measures of inflation has prevented a drop in business rates. There have been numerous calls from property and retail industry representatives to switch business rates’ link from the Retail Price Index (RPI) to the more consistent and reliable Consumer Price Index (CPI). RPI for the year to September 2015 was 0.8%, resulting in a £188 million increase in business rates paid by firms. CPI however stood at -0.1%, which would have produced a £23 million fall in business rates. The use of RPI instead of CPI will therefore cost businesses £210 million in 2016/17 alone.
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The new 49.7 pence rate will see businesses pay almost half of their Rateable Value (the Government’s calculation of the rental value of their property) in business rates, cementing the tax as one of the biggest overheads for firms in England. The rate has risen by 20% since 2010, while overall growth in the whole economy has been only 12.2% (as measured by GDP), illustrating the disproportionate burden that business rates have become to business.
Mark Rigby, Chief Executive at CVS, said: “The news that the business rates levy has reached its highest ever level will be yet another source of frustration for commercial occupiers feeling the squeeze. This is a hangover from a range of poor Government policy decisions which are causing pain for businesses, from SMEs to major multi-nationals.
“To add insult to injury, the Government’s use of out-dated measures of inflation will stop firms getting a reduction in their business rates this year. What could have been positive news for firms is instead yet more pressure on overheads. The link to RPI is costing firms money and is another sign that the current rates regime is clunky, archaic and not geared towards serving businesses.
“Switching to CPI is easily done and would mean less volatility and more clarity for businesses across the country. Fundamentally the business rates system needs to be fairer and more transparent and we call on the Chancellor to address this in his Budget.”
The ‘uniform business rate’ is updated each year in line with inflation. The rate usually rises each year during a five year business rates cycle. However, because the Government has extended the current cycle to seven years – putting back the revaluation to 2017 – the rate has had to rise higher than ever before.
For more information on how to challenge your business rates go to www.cvsuk.com