Rates revaluation could hit small firms hard

Published:  01 October, 2009

KNUTSFORD: Business properties are revalued every five years to ensure that rateable values reflect the changes in the property market.

However, because the present revaluation is based on rent prices from April 2008, before the recession and when property prices were high, small businesses are concerned that, despite the recent slump in the market, they will end up with unfairly high rates bills.

The Forum of Private Business (FPB) survey, the Business Location Survey, which was carried out ahead of October’s revaluation of rateable values, showed that 79% of respondents believe their business rates will increase in April 2010, when the changes are to take place. The average expected rise was 3%, with high street businesses forecasting an increase of more than 5%, and office-based businesses expecting a rise in excess of 2%.

However, according to the Valuation Office Agency (VOA), revaluation will actually mean £5 million less in revenue for the Government and lower bills for many businesses. In addition, ‘transitional relief’ will be available for those ratepayers facing the largest increase in bills.

In its response to the consultation on the application of transitional relief, the Federation of Private Business (FPB) has called for the scheme to be extended over five years to 2014/15, which would involve annual caps being imposed on changes to rates valuations during this period. Further, 61% of respondents to the FPB’s survey believe that transitional relief should apply to empty properties following the removal of empty property rates relief in 2008.

Both measures should provide small businesses the support to help them cope with increased rates bills, and the FPB has joined forces the chartered surveyor Montagu Evans, which specializes in business rates, in order to further help members via  its business rates appraisal service.

“The 2010 revaluation, while not a revenue generating exercise, will affect most small businesses’ rate bills. Our survey shows that business rates are ranked as more of a concern than utilities and staff costs, and most of the businesses surveyed fear the worst – that their rates will go up,” said the FPB’s policy representative, Matt Goodman.

“While that may not be entirely accurate, small businesses are already under a great deal of pressure to pay their business rate bills and most do not see the corresponding value in local authority services. It is extremely important that the Government provides an appropriate and fair system of transitional rate relief for small businesses who will see an increase in their rateable value from 2010."

This year’s rates bill has already been a difficult one for many firms. With no transitional relief in 2009/2010 and a 5% rise in the multiplier used to calculate their bills, small businesses are feeling the impact of changes in their business rates.

After pressure from the FPB and others, the Government allowed businesses to spread the additional cost over the next three years, but the liability remains on the firms’ books, adding another element to the equation.

While one in five (20%) of the small businesses surveyed by the FPB anticipate business rates to remain broadly the same, just under 1% expect them to decrease.

“We recently received our business rates bill for 2009–2010 and were extremely surprised to see a 50% increase in the amount we have to pay this year,” said FPB member Christine Cheesmur, of Guideline Building Services in Crawley, West Sussex.

“We expected an increase as the transitional relief is on a reducing scale and the amount in the pound was bound to increase. We did not expect to find that there was no transitional relief noted on the bill at all.

“Our local authority, Mid Sussex District Council, said that, although we were due five years’ transitional relief – this would have been our fifth year – the Government has decided to end all transitional relief.

“Transitional relief is so important for firms facing an increase in their rates bills, particularly in the current economic climate. The Government should reinstate it in a way that genuinely helps businesses to control costs.”

In addition to the revaluation, over the next few years many firms will have to pay additional rates taxes under the Business Rates Supplements Act, which passed into law in July and will be used for regional projects such as Crossrail in London.

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