Tax & admin · 19 February 2018

Business rates bills confirm £845m tax hike for small firms

Local authorities will collect a total £24.8bn in business rates over the next year

Owners of small UK firms are braced for an £845m business rates hike in April 2018, as the government hands out property tax bills for the upcoming year.

Business rates bills for 2018/19 were distributed to small firms this week, and fresh figures from the Ministry of Housing, Communities & Local Government (MHCLG) have confirmed a cash windfall totalling £24.8bn for local authorities.

The overall value of the upcoming regime indicates the pace at which business rates have risen over the past four years. The £24.8bn figure local councils are set to collect represents a 15 per cent increase on the £21.6bn taken in 2014/15, and a 3.5 per cent rise on 2017/18.

According to the MHCLG, local authorities have set aside £1.1bn for subsidies under the Small Business Rate Relief scheme.

Impact of business rates
• £845m rise in bills between 2017 and 2018
• One owner a week facing prison over unpaid bills
• Two pubs demolished or converted each day of previous regime
• Six shop closures each day of previous regime

Separate figures from the Valuation Office Agency (VOA), the body responsible for business rates appeals, have also showed a significant drop in the number of owners questioning their bills.

In the first nine months of the new Check, Challenge, Appeal system opened in April 2017, just 12,840 appeals were lodged. In the first full year of the previous system, 169,300 appeals were made.

Over one in four appeals were by business owners in London – where rateable values have risen by 23.37 per cent – with 3,440 firms requesting checks on property valuation.

The lowest number of appeals was found in the North East of England, where rateable values have dropped by 0.4 per cent. Just 390 challenged their valuation.

Commenting on the process, Robert Hayton, vice president of Altus Group, the ratings advisory firm handling almost a fifth of all appeals made, said only time would tell if Check, Challenge, Appeal was working.

“The early signs are promising, and incorrect tax assessments are being rectified,” Hayton said.

“The acid test will be how responsive the system is to added volume over time and whether the work to reverse the staircase tax will have an adverse knock on effect.”

A broken appeals process?

In December 2017, it was revealed that just 400 company owners had been able to progress their appeal to the formal “challenge” stage, out of 5,650 who requested a check.

The complexity of the three-stage process was put to the government last year, when cross-bench peer John Lytton told the House of Commons that the “most tortuous” system had been designed to “prevent appeals”.

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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