The FSB and SMEs have spoken out strongly against the continued delays to business rates compensation promised to those hardest hit by the tax rises introduced earlier this year. The change to business rates followed the delayed revaluation of commercial property last year.
The protocol for the rateable review of non-domestic premises normally takes place every five years to ensure businesses are paying their fair share of business rates. However, that protocol was abandoned, and revaluation delayed by 2 years, following the economic downturn. The last revaluation in 2010, was based on property values as they stood in 2008. Since then the economy has more or less recovered and the sharp growth in property prices since that date was reflected in the latest revaluation.
Under the new business rate regime, the government strove to match rates with the amount of rent SMEs starting in April this year. However, as a result of the changes some SMEs were hit with increases of up to 300 per cent from April. Understandably many SMEs were unhappy with the dramatic increases faced, but greeted with some relief a government promise to offer financial assistance – a ‘hardship fund’ – to thousands of companies to reduce the impact of increased business rates. Unfortunately, the £300 million hardship fund announced in the Spring Budget was put on the backburner following the announcement that the government had called a snap election.
But why were no hardship payments made between April and the decision to call a General Election? Well, The Federation of Small Businesses (FSB) claimed councils were saying they could not act because of purdah, the period of time in the UK between an election and the final results which affects the public sector. Local Authorities, however, claimed no payments were made as they were waiting for the government to provide advice on how to proceed.
The government did acknowledge that there was a problem that needed to be addressed, particularly in London and the South East were rates increases were highest. David Gauke, then Chief Secretary to the Treasury, claimed the Government was urgently trying to push through the compensation, after receiving numerous complaints from SMEs. Speaking at a Small Business’ election hustings at the Imperial War Museum, Mr Gauke said:
“We are trying to get [the compensation package] through as quickly as we possibly can. There is a big compensation package… to help those who are seeing significant increases.”
“We have to remember one of the things we have done is extend small business rates relief which means a lot of the smaller businesses who previously were paying rates now no longer do,” he added.
Speaking shortly before the election, Mike Cherry, National Chairman of the FSB, said ministers needed to take urgent action to fix the problem:
“The first order of business for the Communities Secretary in the next government should be to get a grip and make sure the promised help is delivered in the first month of office.”
John McDonnell, Shadow Chancellor, and Baroness Kramer, the Liberal Democrat business spokeswoman, also expressed similar concerns. Both Mr McDonnell and Ms Kramer agreed that there needed to be a fundamental reform of the tax to level the playing field between the high street and online retailers. They also agreed that business rates should also affect companies who had physical operations.