Back in June, the British Retail Consortium (BRC) called for some smaller retail properties to be freed from paying business rates. As part of a wider consultation on business tax structure reform, the BRC argued that such a move could slash costs for up to 100,000 small businesses.
But would reducing business rates or dropping thousands of business spaces from tax leave a massive hole in the Exchequer’s coffers?
“Business rates are a constant worry for our clients,” says Paul Giness of The Beattie Partnership, one of the UK’s leading Chartered Surveyors, “But the government is helping by providing incentives to small businesses and giving more powers to councils via the Localism Act. In addition once the 2017 revaluation commences, this should rebalance the valuations to reflect the current state of the property market”.
While the BRC argues that a boost in high street business and a drop in enforcement costs would even out any losses, there is some hesitation about the idea.
“Asking any government to drop taxes is a hard sell and although there’s no guarantee that the treasury will act on this Consultation, we await the news in the autumn statement with interest,” continues Paul. “In the meantime, however, there are already substantial rate reliefs available, if you know where to find them.”
Business rates have been around for hundreds of years in various guises. Despite their burden on high street businesses, the system of taxation has changed very little.
The government recently undertook a consultation on shaking up the system, however, and the BRC had a pretty radical suggestion: dropping properties with a rateable value of less than £12,000 from paying anything at all. Business Rates net the government over £27bn annually so, on the surface of it, this could leave the treasury with a hole in its finances. But numbers from the BRC tell another story.
According to the Consortium, the smaller businesses that might benefit from the change make up 64% of the total number of firms paying the charge. Despite this, however, the amount that the government makes from them is just 6% of the total income generated by Business Rates.
The Business Secretary, Vince Cable, has suggested that the government is planning to provide small companies relief on their business rates. An announcement of “something positive in the pipeline” will be announced in the autumn statement. Considering changes already in the pipeline, would dropping rates for some businesses be necessary to boost growth on the high street?
Property Aspects Magazine appreciates the contribution from rating experts, The Beattie Partnership www.bepart.co.uk