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Business rates rise is biggest issue for small firms in London
Small firms are angry at the uncertainty and cost of the first business rates
rise in seven years, with small firms and London companies big losers
Nearly three-quarters of small companies in London say business rates are the
most important issue they face, piling further pressure on the government over
the controversial tax.
The Federation of Small Businesses (FSB) warned that London was in “serious
danger of losing its vital support system of micro and small businesses”. The
average micro business, which employs fewer than 10 people, will have to pay
£17,000 to cover business rates from April, it added.
The trade body’s warning comes a day after the government accused critics of
“scaremongering”, saying that three-quarters of firms would see either no change
in their business rates or would see them reduced.
Other influential trade bodies, including the Institute of Directors and the
British Chambers of Commerce, have already called on the government to overhaul
the tax.
The change in business rates payments from April is down to the revaluation of
property in Britain. This is supposed to take place every five years but the
previous revaluation was controversially delayed by the government in 2015 for
two years, making the revised bills more pronounced.
The revaluation is likely to benefit struggling high streets in northern
England. London, however, will record an increase of around £9bn over the next
five years.
A survey by the FSB and trade body Camden Town Unlimited, found that rates were
the biggest issue for 74% of small businesses in London, ahead of economic
uncertainty and problems in recruiting staff.
Four in 10 businesses that are paying rates said they expected a rise of more
than 20%, while three in 10 said they were unsure what the changes from April
would mean.
The FSB and Camden Town Unlimited called for the rates threshold in London to be
increased, allowing more small firms to avoid the tax.
Sue Terpilowski, the FSB London chair, said: “London is in serious danger of
losing its vital support system of micro and small businesses.
“The business attraction of London is that it has a strong ecosystem of support
services from the micro and small business community. Some of these businesses
are the ones that become high-growth companies from a standing start, often in
the hi-tech sectors.
“We must ensure that this support system remains in place to keep the UK economy
and the London economy thriving. We need to realise that the hard costs of
operating a business in the capital are starting to outweigh the benefits, which
simply does not make economic sense – and so tackling these burdens at the
spring budget is critical.”
The government defended business rates on Thursday. David Gauke, chief secretary
to the Treasury, said: “Far from the picture painted by scaremongering ratings
agents, nearly three-quarters of businesses will see no change, or even a fall,
in their business rates bills.
“The fact is that the generous reliefs we are introducing mean that 600,000
small businesses are paying no business rates at all – something we’re making
permanent so they never pay these bills again.
“Whether on a town’s high street or in a rural community, we’ve also introduced
£3.6bn in support for companies affected by the business rates revaluation – a
process that is making the system accurate and fair for everyone.”
However, accountants urged the government to reconsider the rates system because
of the uncertainty caused.
Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified
Accountants (ACCA), said: “The government should ensure that this is not
introduced at the expense of the competitiveness of UK plc as a place to work
and to locate a business.
“The system also needs to take account of fairness when some high-street shops
will be hit by hikes of over 400% on current rates, while online retailers will
see rates cut in many instances.
“For many of the productivity-boosting[small to medium enterprises] up and down
the country, increases will eat into disposable income which could better be
spent on investment, recruitment or research and development.
“This is particularly important given the low levels of confidence following the
result of the referendum on the UK’s membership of the European Union and
looking ahead to the longer-term effect of the devaluation of sterling in
increasing supplier costs.
“The government should revisit these proposals and carefully consider if the
revaluation is the best way to raise revenue from the UK’s thriving small and
medium-sized businesses in an era of high uncertainty.”