Firms fighting to revive our high streets punished by rate increases
THOUSANDS of entrepreneurs are being hit with huge increases in business rates because they have done up dilapidated high street properties.
Business rates are based on what a property is worth on the rental market, so when occupiers spruce up a derelict or run- down site, the value goes up and they are penalised with higher taxes.
Campaigners said this can push up costs by hundreds of thousands of pounds a year.
And they fear it is damaging the high street by preventing businesses from investing.
Kate Nicholls, of trade body UK Hospitality, said: ‘When businesses invest to give communities vital services like pubs, hotels and restaurants they take a huge financial hit as the tax take is hiked. Business rates are nothing short of a tax on success and a disincentive on entrepreneurship.’
How much properties are worth is calculated by the Valuation Office Agency, which takes into account typical rental values on a street and the quality of a property. This is used to come up with a rateable value. The higher this is for a property, the more tax its owners pay.
In England and Wales, a medium-sized firm usually pays 49.3p in the pound, so a property with a rateable value of £ 200,000 would be charged £98,600 a year in rates.
Momentum is growing for an overhaul of business rates. Around 50,000 retail jobs have been lost this year as high street stores battle with online retailers that are taking huge amounts of their business.
The Daily Mail has launched a campaign to save our high streets. We are calling for reform of rates as a matter of urgency, cuts to parking charges and a fair tax for big internet shopping businesses so there is a level playing field.
On its website, the Government admits: ‘Refurbishment may also increase the valuation to reflect the higher quality of property.’ Certain kinds of equipment also automatically boost the level of a property’s business rates. For example, a shop which puts in CCTV, a cold store, a lift or even a fire alarm will be hit with an increase in taxes that is likely to be in the thousands of pounds a year.
Offices which install air conditioning or a back-up power supply to keep their computers running during a blackout will also attract higher rates.
It is feared that these charges can mean business owners decide not to refurbish shabby buildings, or even install machinery that would make the premises more attractive, even though this would boost their income and allow them to hire more staff.
Stuart Adams, of the Institute for Fiscal Studies think-tank, said: ‘Business rates are a badly designed tax and they should be reformed.’
A spokesman for the Ministry of Housing, Communities and Local Government said: ‘High streets and small businesses are the backbone of our economy. We want to see them thrive.
‘That’s why we are taking measures to support high streets and reduce the burden of business rates – including introducing over £10billion worth of business rate support by 2023.’