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Mrs_Sally-Ann_Hart

Cllr Sally-Ann Hart is the Cabinet Member for Tourism and Culture on Rother District Council.

The rumblings of discontent in recent weeks over the revaluations of Business Rates are continuing. The main fears are that internet giants such as Boohoo, Amazon, Asos and other online retailers will see a cut in Business Rates; high street stores are being unfairly penalised by the revaluations;  the Business Rates bill for offices in London’s Square Mile will rise by £1.4bn over the next five years (a 33 per cent increase which will ‘undermine the financial sector as it deals with Brexit’); and that the rate changes will have a negative impact on the NHS.

Essentially, the point of Business Rates is that occupiers of non-domestic properties contribute to the cost of local services, similar to the Council Tax paid by domestic properties. Business Rates are based on the rateable value of business premises (assessing the annual rent that the property would rent for, were it available to let on the open market on a fixed valuation date). Council Tax is also based on property values, but with a ‘personal element’. Properties are placed in one of eight Valuation Bands which determines the level of tax payable. Council Tax is not based on rateable value nor is it related to a property’s current market value.

With cuts to local government funding, income from Business Rates will continue to be vital to local authorities, not only for the provision of services, but also for investment in a local authority’s economic and social strategic plans.

Business rates can, in certain circumstances, have a negative effect on regeneration and improving public realm. Rother District Council (RDC) has recently engaged in a lengthy Member-led analysis of the district’s public realm, culminating in the development of a far reaching and ambitious strategy. Research has firmly established the importance of a high quality public realm to economic growth, regeneration, traffic management, and health and social well being. Tourism, retail trade, commerce, community life and day to day living depend on a quality urban and rural public realm.

Last year for example, I was contacted by owners of a local shop in Rye regarding a 103 per cent increase in their Business Rates. The business seemed to be doing reasonably well until the owners decided to improve the shop by putting in air conditioning and making other improvements. The owners did not realise that in making such improvements to the shop that it would attract a higher rateable value.

The issue is twofold: firstly, the revised rateable value means that the business no longer qualifies for the rate relief for small businesses. The owner is worried that he has no choice but to close. This would not only be devastating for the owners, but also for local economic development. Secondly, if shops and businesses make necessary improvements to their properties (which contribute to a quality public realm), but as a result of this they are “penalised” by attracting a higher rateable value for business rates, there is clearly no incentive to make such improvements.

While we are striving to improve and maintain our public realm, the current system of Business Rates pulls us back. As the British Retail Consortium has said “We need a business rate tax that ‘flexes with overall economic performance, is shared equitably across different industries and comes with positive incentives for business.”

Business Rates seem to be quite popular with economists, but not the majority of our MPs. The British Retail Consortium research published in 2014 showed that 80 per cent of MPs believe that Business Rates are “not fit for purpose”. To quote Michael Gove “I think we have had enough of experts”.

Our MPs should be given a chance to pragmatically rethink and reconsider Business Rates. Alternatives to Business Rates have been suggested. One option mooted is to replace them with a local sales tax, additional to VAT. Currently, any tax that is like VAT risks breaching EU law as Europe does not allow such differential tax rates within EU states.

With Brexit on the horizon, we now have an opportunity to react to changing circumstances affecting policy and consider all alternatives to Business Rates as we will not be hampered by EU legislation; we will have the freedom to find the best solutions for British businesses going forward.

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