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The latest change in business rates is causing controversy across the country, with many claiming they will be out of pocket. So who are the winners and losers, and what can you do if you’ve been affected?
Business rates are taxes placed on commercial properties. They are refreshed, based on the rental value of property, every five years. As the last refresh was delayed by two years, this April will see the first change since 2010. The rates are based on property values, meaning that areas that have seen a rise in property values may be impacted heavily. Whilst rental values have remained more or less static in the North West and the Midlands, other areas are facing rises of up to 415%.
London Mayor Sadiq Kahn has described the changes as ‘unacceptable’ and asked the Government to cut rates for firms that pay the London Living Wage. Businesses in particularly desirable areas of the capital are seeing the steepest rises, with Dover Street in Mayfair in line for a rise of 415%. An analysis by CVS found that London’s overall bill will skyrocket by 9.4 billion come April.
The food and beverages industry has been vocal about about the changes, with representatives from All Bar One, Pizza Express and Greene King signing a joint letter to the Chancellor asking him to reconsider the refresh, or at least offer a staggered transition period. They claim that the changes could cost the hospitality sector up to £500 million. In pubs, The Sun has claimed that changes could add 5p to the cost of a pint. According to the CVS analysis rising rates have contributed to the equivalent of four pubs closing per day since 2010.
Council representatives have spoken to DEFRA about the threat of business rates to rural businesses, stating that the rise could even ‘ruin the rural economy’. Rural businesses such as riding stables and vineyards naturally need a lot of space, however unlike bricks and mortar businesses, the amount of land used doesn’t necessarily correlate with profits. Rural businesses are arguing that, as property valuations include size as a metric, they are an inappropriate measure to value rural properties.
Hotels and guesthouses in Britain’s most loved destinations could see their rates rise by up to 80% from April. This is against a background of increasing costs, as inflation hits food prices and import costs rise. Scottish hotels are seeing extra steep hikes as the value of their premises were calculated at a time when the economy was stronger.
Accommodation used for holiday lettings will also be affected. Holiday homes are subject to business rates if they are available to let for 140 days per year or more. Rises could be up to 50% for these properties, with those in coastal areas being hit particularly hard. Proprietors argue they’ll have no option but to raise prices, leading to a vicious circle where holidaymakers instead choose to holiday at chains who can afford to offer discounts.
The Financial Times has argued that the rates rises are skewing favour towards online businesses, at the cost of the UK high street. The reason for this is that large online retailers tend to operate warehouses in cheaper out of town areas, whilst high street stores need to be in more expensive areas with high footfall. There are fears that the rate rises will weigh especially hard on independent shops, forcing them off the high street in favour of chains who can afford to absorb the increases.
The Government claims that the rate changes will make life easier for small business, with rates relief rising to £12,000, an increase of £6,000. The Government claims that three quarters of businesses will see little impact from the changes, and some will even see a decrease in their bills. They have also introduced a 3.6bn transitional relief scheme which it is claimed will ease the changes for businesses that are adversely affected.
As it stands, the winners look like being:
The rateable value of business premises are based on the open market value of a property. However, mistakes can be made. If you think that your business may have been overvalued then there are steps you can take to have it reassessed. Firstly, you should contact the Valuation Office Agency (VOA) to discuss your case and see if an informal settlement can be reached. If you are not satisfied then you can make a formal appeal online which may end up in a Valuation Tribunal. Whilst you are waiting for your appeal to work its way through the process you will still be liable for the set business rates.
Find out how the rateable value is calculated here.
You can find out about the appeals process here.
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