There appears to be an appetite for business rates reform, and at the chamber we would support this because there are a number of issues with business rates.
Firstly, business rates are a tax on being in business rather than a tax on profits, this means that in a recession organisations that are breaking even but are tied in, on say a 5 year lease, have to pay rates that their business can often not afford.
Secondly, business rates are usually assessed on rental values every 5 years, with the last assessment was in 2008. So given that the peak of the commercial property market was in Q3 2007, the assessments are based upon peak figures. This means that in a recession, you pay the highest rates when you can least afford it. Normally recessions last for a few years, this one continues after six years.
Thirdly, the mathematically minded amongst you will have spotted that 2008 plus 5 years is 2013, so in theory business rates should have been assesses at a point where the IPD Index shows a drop in rentals of some 35% from the Q3 2007 high, so rates should have dropped significantly. However someone spotted this and simply cancelled the 2013 revaluation, so businesses continue to pay at the peak rate – when they can least afford it.
To give some scale to this, typically historical business rates have been around 40% of Rents, more recently since say 2010, many businesses who have been able to effectively renegotiate their rents with the Landlord have found Rates to be of a similar size to the Rents payable.
Fourthly, Local Councils are able to offer “Hardship Relief” for businesses that are struggling. Given the above you might expect that relief to be widespread, as far as we are aware it is not.
We all want a range of interesting shops in our High Streets, not the same large chains and Charity shops. Where has that Diversity, Individuality, Choice, Initiative, Inspiration and Vibrancy in our high streets gone? Well they have in no small part been sacrificed on the altar of business rates.
So we would say, – It is not just retail but all businesses that are effected, especially those with large premises. Tax businesses upon their profits not their aspirations. Automate small business rate relief (SBRR) tomorrow, the VOA know which premises are eligible, and who is in occupation, (it is on the rates bill), so multiple occupancy which can negate SBRR should not be a problem. Get the bill right first time, and make any conditions clear on the bill.