Air conditioning tax is far from cool for small companies

SMALL companies are being crippled by an “air-con tax” which means their business rates increase if they install equipment to keep workers cool in the heatwave.

The Government is this week being urged to lift the tax after Britain baked in record bank holiday temperatures of 33.3C (92F).

Businesses are also expected to pay increased rates if they install CCTV on their premises – despite incurring total annual costs of up to £17bn as a result of crime, according to the Federation of Small Businesses (FSB).

The Valuation Office Agency classifies air conditioning, CCTV systems, fire alarms, lifts and solar panels as “plant and machinery” assets which add value to a property.

This forces business rates up meaning owners are “pummelled with a huge tax bill” for “trying to keep workers cool”, the FSB said. Around 190,000 business premises were summoned to court over the non-payment of business rates during the last financial year.

Mike Cherry, the FSB national chairman, said: “It’s ludicrous that doing something as simple as trying to keep your employees and customers cool with an air conditioning unit can cause your business rates to spiral.

“Sunny weather like this could also have business owners thinking about installing solar panels. These too are, sadly, subject to additional business rates. When you consider the effect of business rates alongside the political uncertainty that small firms have been up against over the summer, it’s no surprise that seven in 10 are not planning to increase investment in the near future.

“With the economy contracting last month, this Government should be devising new incentives to invest and rethinking elements of the tax system – like business rates – that encourage the opposite.”