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Small firms urge Chancellor to end business rates chaos at Budget

Phillip Hammond should end the staircase tax, bring business rates bill increases under control and commit to more frequent rates revaluations at the Autumn Budget, according to the Federation of Small Businesses (FSB). The asks come seven months after the 2017 business rates revaluation took effect on 1 April.

FSB first threw light on the staircase tax in August after small businesses occupying split workspaces unexpectedly started to receive hiked business rates bills. The levy has caused many to lose small business rates relief, meaning bill increases of over 4,000 per cent. FSB is calling on the Chancellor to put an end to the staircase tax at the Budget.

All business rates bills across England and Wales are set to rise by 3.9 per cent in April 2018 in-line with the largely discredited Retail Prices Index (RPI). At the same time, firms will lose their year one cap on bill increases. FSB recommends that the Chancellor halts use of the RPI measure for business rates purposes.

Many of those hardest-hit by April’s revaluation across England are still waiting for delivery of the £435 million emergency relief package announced by the Chancellor at the Budget in March.

Mike Cherry, FSB National Chairman,
said: “Today marks seven months of business rates chaos following April’s bruising revaluation. In that time we’ve had the staircase tax, chronic delays to relief measures, a disastrous new appeals platform and now an RPI-linked increase in bills. The business rates regime is nothing short of a living nightmare for millions of small firms.     

“The Chancellor must put an end to the staircase tax at the Budget and ensure that each of the emergency reliefs announced at the last Budget are in place by 22 November. Four in ten councils are yet to pass on their share of the £300 million business rates hardship fund to struggling small businesses. After seven months, that’s ridiculous.  

“The RPI measure of inflation is widely seen as outdated, so it’s hard to understand why it’s still used to determine rates bill increases. This practice has to end. The least the Chancellor can do is bring forward the switch to CPI-indexation from 2020 to 2018.”    

FSB is also calling on the Chancellor to commit to more frequent business rates revaluations at the Budget. It argues that moving to more frequent reassessments would allow firms to benefit from fluctuations in the property market.

The country’s largest business group also highlights the disproportionate impact of April’s revaluation on London. The capital hosts 16 per cent of rateable properties but bears 32 per cent of UK rates payable. FSB is urging the Chancellor to set new small business rates relief (SBRR) thresholds for inner and outer London of £20,000 and £15,000 respectively. The latter is the nationwide threshold for SBRR eligibility in Scotland.

Mike Cherry
added: “Businesses waited seven years for April’s revaluation which was supposed to take place in 2015. Naturally, property values shot up in that time, adding to the severity of bill increases. Infrequent revaluations make it harder for firms to benefit from occasional slowdowns in the property market. Switching to two or three-yearly reassessments would make for a much fairer system.

“London has some of the highest property costs in the world and business rates are no exception. This disproportionate burden needs to be addressed in what is increasingly recognised as an outdated, regressive business rates system.”         

For a full copy of FSB’s Autumn Budget submission please contact the press office.