Tax & admin · 30 May 2017

Business rates relief delay hitting most vulnerable small firms

Business rates review
Business rates continue to put small firms at risk

Thousands of small UK firms continue to pay too much in business rates, having not yet received the relief they’re entitled to almost three months after the Spring Budget, and two months since the start of the new tax year, research has found.

Despite £25m of government funding having been earmarked for small business rates relief in 2017, a lack of coordination between central government and local UK authorities has meant that owners at some of the country’s most vulnerable smaller firms have yet to receive any cash benefit from new business rates relief, putting many at risk of bankruptcy.

The chancellor, Philip Hammond, introduced a new £115m business rates relief scheme at his Spring Budget in March to help reduce the impact of the 2017 business rates revaluation – the first in the UK for seven years.

However, it was not made clear how the scheme was to be administered at the local level and, several months later, local authorities are still waiting for new business rates relief guidance from central government, whilst small business owners continue to pay extortionate unrevised business rates.

In March, a letter to all local UK councils from the Department for Communities and Local Government (DCLG) outlined that Whitehall expected local authorities to proceed with granting new levels of business rates relief to qualifying business owners, promising council heads they’d be reimbursed at a later date.

The letter read: “The government expects billing authorities to grant supporting small business relief to qualifying ratepayers” adding “the government is not changing the legislation and will reimburse billing authorities”.

However, local UK authority leaders received no further guidance on how new funding for business rates relief should be allocated and, although they’re legally able to adjust business’ tax bills, have had no assurances of how funds granted to businesses under the new scheme would in fact be reimbursed.

In a recent statement about new business rates relief, a spokesperson for the London Borough of Tower Hamlets said: “We are waiting for the government to confirm the funding regulations for the scheme. When they do, we will be able to allocate funds to eligible businesses.”

Meanwhile, a spokesperson for another local UK authority – Darlington Borough Council – said: “We are awaiting further guidance from the DCLG to allow our system to be upgraded, which will now be after the general election.”

According to research from business rates specialists CVS, a total of 24,986 small UK companies had lost all or part of their business rates relief following this year’s revaluation, which came into force on 1 April.

Under the revaluation, some 21,751 UK firms lost their tapered business rates relief, while 1,683 went from paying no business rates at all to a new threshold of tapered business rates relief. A further that 1,552 UK business owners went from paying no business rates at all to paying regular rates, thereby losing their relief entirely.

As a result, the research suggested that some of the UK’s most at risk small firms now faced business rates tax hikes of around £45.85m – an average increase of around £1,835 per property and the equivalent of 62 per cent more tax payable than before the business rates revaluation.

Commenting on the findings, CVS chief executive, Mark Rigby, said: “A common sense approach here is needed. The money to help those most in need is coming from government, and there is no reason why revised tax demands shouldn’t have been sent out by local councils by now. These delays are simply causing panic, confusion and alarm for small firms.”

Read more of our coverage following this year’s business rates revaluation: 

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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