Small shops and offices could see their business rates relief ended in this month’s Autumn Statement, which would mean a 20% rise for some businesses.
If the Chancellor George Osborne fails to renew the biasness rates relief brought in last year in his Autumn Statement many small businesses will take a hit, a further blow to many struggling high streets.
Experts fear that the tax breaks could be stopped from next year as the Government looks to reform business rates, details of which are to be announced in the Autumn Statement at the end of this month.
Chancellor Osborne announced plans to allow councils to retain all the business rates collected by them at the Conservative party conference in Manchester last month. At present councils retain just 50% of the business rates they collect. Mr Osborne said the coming reform which will be effective from 2020, will be the “biggest transfer of power to our local government in living memory”.
According to business rates expert Paul Turner-Mitchell, quoted in the Daily Telegraph, more than 275,000 small high street shops could see their rates bill rise from an average of £7,567 to £9,140 next year, as retail relief worth £417m is due to come to an end,
Relief of up to £1,000 was applied to all occupied retail properties with rateable values below £50,000 until 2016 two years ago, and increased to £1,500 for 2015.
However, this was seen as a temporary measure to essentially give businesses a cash injection at a time when high street footfall was falling. In Rochdale, says the Daily Telegraph, rates are currently three times as high as rents.
Business rates provide around £25bn of revenue for the Treasury annually but experts fear the Chancellor may stop the “temporary” relief from next year when the Government looks to reform business rates. Many argue the tax failed to change with the heavy downturn in the economy, particularly for the retail high street, as the rateable values were never devalued downwards when a revaluation was due.
Revaluations should take place every five years, but the Government postponed the revaluation that was due to take place in 2013 and enforced in 2015, which prompted an outcry from shop owners, many of whom are still paying tax based on property values from 2008, right at the peak of the market.
As the economy has now largely recovered from the worst of the recession, many towns in the North are still struggling on the high street, where vacancies have seen property values fall. One example quoted in Rochdale, gives rates at more than three times the current rent.
The owner of a key cutting and shoe repair shop in Rochdale, Shoemaster, Chris Lesbirel pays £6,000 in rent each year but says the rates bill is £19,160, and he is not benefitting from any local subsidy.
Mr Turner-Mitchell, who is a former clothing retailer, now leading a campaign to reform business rates, told the Daily Telegraph:
“Property taxes are currently the highest of any G7 country. A 20pc rise could do untold damage and lead to more empty shops. A lot of retailers are on a knife edge and business rates are the final nail in the coffin.”
High Street Shops Face Business Rates Hike – https://t.co/Y8iwA6pqO1
— LandlordZONE (@LandlordZONE) November 11, 2015