The government has mounted a staunch defence of the shakeup in business rates, after Britain’s biggest business groups strongly condemned the changes.
Thirteen major business groups, including the CBI, British Retail Consortium (BRC) and the Federation of Small Businesses (FSB), have joined four professional groups to sign a letter sent by a law firm to the government opposing the changes. In particular, they are worried that small firms could be blocked from appealing against rate rises and have asked for that clause to be dropped on the grounds it is potentially unlawful.
The change in business rate payments from 1 April is linked to the revaluation of property in Britain. This happens every five years, but this time it has taken seven years because the revaluation was controversially delayed in 2015.
About 510,000 businesses face rates increases of up to 300%, the FSB said, although transitional reliefs would mitigate this.
David Gauke, chief secretary to the Treasury, was once again forced to defend the changes and dismissed businesses’ concerns. He told BBC Radio 4’s Today programme on Friday: “Nobody is going to be stopped from appealing ... There is a huge number with very speculative appeals that are going in, very often encouraged by agencies on a no-win, no-fees basis. That is frankly clogging up the system and getting in the way of appeals for those who have got a genuine problem where maybe there has been a mistake or an error and that process is much slower than it should be.
“What we want to do is to reform the appeals process to improve it to ensure that where there are mistakes they can be addressed much more quickly and what we are trying to do is to discourage speculative appeals that give no justification or reason, just on the hope that they might strike lucky.”
Gauke added: “Three-quarters of businesses are actually going to see their business rates fall or stay the same. Outside London, average bills are falling by 11%. So it is right that we bring it up to date.
“It is also right that there is transitional support for those one in four businesses that are seeing an increase in their business rates. We have got a £3.6bn transitional package to try to smooth that increase. But it is right that we bring business rates values up to date to reflect current rental values.”
The BRC’s chief executive, Helen Dickinson, said: “Given the growing burden of business rates, it is essential that each ratepayer pays its fair share. However, the plans for the new appeals process would mean that a business rates valuation determined to be inaccurate by the independent Valuation Tribunal for England, would only be corrected if it is deemed ‘outside the bounds of reasonable professional judgment’. This would be unfair to ratepayers and create additional uncertainty for local government.”
The BRC said retailers would pay an additional £2bn in business rates over the next three years, compared with the past three years.
Neil Whitham, who runs a fish and chips shop in St Ives in Cornwall, said the business rates revaluation was “totally unfair”. He will now pay 62%, or £4,000, more a year, even though his rent has only gone up by 5% a year. “The losers are paying to supplement those winners. We are supplementing those that have had rate reductions.”
Whitham added: “[The government is] creating a tiered high street. You and a neighbour may have very similar shops, maybe 25% difference in square footage and one is paying full rates ... £7,500 a year and a slightly smaller shop is paying nothing at all.”
He warned that the changes could drive small firms out of business. “There are many businesses that are on the threshold of being able to just survive and there are those that fall by the wayside, unfortunately.”
Gauke rejected the accusation that the revaluation formula was unfair. He said the government had protected the very smallest businesses, with a third of firms not paying business rates. Others are “paying more because their rent has gone up, because they tend to be either in sectors that are flourishing or parts of the country that are flourishing”, such as St Ives.
Gauke also brushed off suggestions that turnover should determine business rates rather than the rental value of the property. Business rates are effectively the commercial version of council tax.
Jon Stevens, specialist tax lawyer at law firm DWF, said: “The proposals to change the appeals procedure in no way restrict the ability of businesses to appeal. But appeals are less likely to be successful now and the outcome appears to be unfair, which will no doubt deter many businesses from trying.
“Business rates are a significant cost, raising approximately half as much as corporation tax. The fact that they are unrelated to turnover or profit means they are a direct fixed cost to businesses.”
