Will your work suffer?
The announcement of the Budget confirmed that business rates are set to rise by an average of 5.77%.
Experts warn that the increase, coupled with the painfully slow rates appeals process, is stifling business growth in the UK. The estimated total amount of savings due back to UK businesses from the VOA is £1,227,393,324.
CVS, which advises firms on business rates appeals, argues that while the Government says it is trying to support UK businesses, imposing such a big increase in business rates when many firms are struggling to break even – let alone make a profit - is a total contradiction.
Commenting on the increase, Mark Rigby, Chief Executive of CVS said: “Businesses will feel this rise in rates hard. The average retail space can now expect a yearly rates bill in excess of £10,000. This figure is to be paid on top of rent and wages. Imagine the amount of trade your local newsagent would have to do to cover that cost. With weak economic growth and low consumer spending, taxes on business need to reflect realities.”
Business rates often represent the third biggest overhead after rent and wages and the increase will see a number of businesses go to the wall. Following changes made for the 2010 appeals process, the system of dealing with such appeals has become cumbersome and overly bureaucratic. As a consequence there are some 340,000 outstanding appeals. Claims and any subsequent rebates can take up to 18 months to process – which may be too late for many businesses in a challenging economy.
Rateable values, upon which business rates are based, are determined by the Valuation Office Agency (VOA). Due to the way in which the VOA collects and assesses these values, they can be inaccurate as the VOA do not possess or analyse all the rental evidence correctly within the locality of the property. The VO may also fail to fully reflect the disabilities of the property in comparison to similar properties in the area – making the rates bills grossly unfair and misleading.
Exorbitant business rates undermine the profitability of UK companies and detract from their capacity to invest and grow. At best this impacts on their ability to create new jobs and at worst forces companies to close, contributing to further unemployment and stifling the UK economy.
The average retail space can expect a yearly rates bill in excess of £10,000. This figure is on top of rent and salaries. Imagine the amount of trade your local newsagent would have to do to cover that cost. The struggling pub trade will also have to cover bills in excess of £14,000 but as pub and restaurant rates take turnover into consideration, this could be a lot more unless they can prove that they are serving fewer customers each week.
So what can businesses in England and Wales do to mitigate the costs? Well according to CVS, businesses must challenge the assessment of the property they occupy in order to recoup costs owed to them – money that rightfully belongs to businesses, not the Government.
Listen to the podcast with Don Baker, National Head of Rating at CVS for top tips on the exact steps a small business owner should take to try and recoup money.