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SMEs fear rates revaluation could hit them hard

Date Added: Fri October 2 2009
The majority of small business owners fear they will be forced to pay inflated rates bills for five years, according to a survey carried out by the FPB ahead of October's revaluation of rateable values.

In all, 79% of respondents to the FPB's Business Location Survey believe their business rates will increase in April 2010, when the changes are to take place. The average expected rise was 3%, with high street businesses forecasting an increase of more than 5%, and office-based businesses expecting a rise in excess of 2%.

Business properties are revalued every five years to ensure that rateable values reflect the changes in the property market. However, because the present revaluation is based on rent prices from April 2008, before the recession and when property prices were high, small businesses are concerned that, despite the recent slump in the market, they will end up with unfairly high rates bills.

According to the Valuation Office Agency (VOA), revaluation will actually mean £5 million less in revenue for the Government and lower bills for many businesses. In addition, ‘transitional relief' will be available for those ratepayers facing the largest increase in bills.
In its response to the consultation on the application of transitional relief, the FPB has called for the scheme to be extended over five years to 2014/15, which would involve annual caps being imposed on changes to rates valuations during this period. Further, 61% of respondents to the FPB's survey believe that transitional relief should apply to empty properties following the removal of empty property rates relief in 2008.
Both measures should provide small businesses with certainty and the support to help them cope with increased rates bills.

"The 2010 revaluation, while not a revenue generating exercise, will affect most small businesses' rate bills. Our survey shows that business rates are ranked as more of a concern than utilities and staff costs, and most of the businesses surveyed fear the worst – that their rates will go up," said the FPB's Policy Representative, Matt Goodman.

"While that may not be entirely accurate, small businesses are already under a great deal of pressure to pay their business rate bills and most do not see the corresponding value in local authority services. It is extremely important that the Government provides an appropriate and fair system of transitional rate relief for small businesses who will see an increase in their rateable value from 2010."

This year's rates bill has already been a difficult one for many firms. With no transitional relief in 2009/2010 and a 5% rise in the multiplier used to calculate their bills, small businesses are feeling the impact of changes in their business rates. After pressure from the FPB and others, the Government allowed businesses to spread the additional cost over the next three years, but the liability remains on the firms' books, adding another element to the equation.