Businesses are set to pay a massive £400m more in rates in 2016/17 as the tax rate levied on commercial property reaches its highest ever level, according to CVS Surveyors.
The business rates specialist has warned that from April 1, 2016 the ‘uniform business rate’ will hit 49.7p in the pound – the highest level since the rate was introduced back in 1990 – and is set to cost businesses an additional £188m collectively in the coming tax year. Companies with small business properties will suffer too as the Government is also ending the business rates discounts that have been applied, which will add a further £284m to bills, creating a total addition of £400m to business rates.
The position is getting so bad that a quarter of the 250 UK business owners surveyed by CVS Surveyors said they have considered other forms of employment or make staff redundant because it is becoming so costly to run their business. One in five said business rates represent one of their biggest business costs.
Mark Rigby, Chief Executive at CVS, said: “The news that the business rates levy has reached its highest ever level will be yet another source of frustration for commercial occupiers feeling the squeeze. This is a hangover from a range of poor Government policy decisions which are causing pain for businesses, from SMEs to major multi-nationals.
“To add insult to injury, the Government’s use of out-dated measures of inflation will stop firms getting a reduction in their business rates this year. What could have been positive news for firms is instead yet more pressure on overheads.”
The insistence of the Government that business rates must link to the retail price index (RPI) which for the year to September 2015 was 0.8% added £188m to the cost of business rates for firms. Had this been linked to the consumer price index (CPI) which stood at -0.1% for the same period, businesses would have seen their rates fall by £23m.
Mr Rigby said: “The link to RPI is costing firms money and is another sign that the current rates regime is clunky, archaic and not geared towards serving businesses.
“Switching to CPI is easily done and would mean less volatility and more clarity for businesses across the country. Fundamentally the business rates system needs to be fairer and more transparent and we call on the Chancellor to address this in his Budget.”
The Rateable Value is the Government’s calculation of the rental value of a business’s property, so the 49.7p rate will mean they have to pay almost half their rateable value in business rates. The figure has gone up by 20% since 2010, while economic growth as a whole has risen by just 12.2% in the same period. The rate rises each year during a five-year cycle, but the Government has delayed the next revaluation until 2017, so this will actually be a seven-year cycle, meaning the rate has risen higher than ever before, said CVS.