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February 22, 2013

94% of small firms feel business rates are too high

The majority of UK small businesses say they are not impressed with changes made to the tax system by the coalition government, according to research by the Forum of Private Business (FPB).

As the government passes the mid-way point in its five-year term of office, the small business support group polled its members to gauge attitudes to tax changes. Overall, the changes were seen to be negative in terms of "fairness, simplicity, efficiency, stability and certainty".

In total, 28% of business owners said they thought the fairness of the tax system had deteriorated, compared to 17% reporting an improvement. A quarter thought it had become more complex, with only 14% saying it had simplified.

But the single biggest complaint among small firms concerns business rates. A massive 94% of all business owners felt that the level of taxation on commercial properties was too high. Two thirds of those also said they saw no real benefits considering the amount of money they were spending on the tax.

Many also reported that there were few local initiatives to support growth, with some saying that local councils were actually hampering growth. Just 3% of respondents saw no problems with business rates.

"It's probably fair to say that business rates are the most despised of all commercial taxes by today's small business owner in the UK," said the FPB chief executive, Phil Orford.

"It's a crippling tax that business owners simply have no choice but to pay. Many feel their hard-earned cash is not being spent wisely, or certainly not for their advantage or benefit. It's evident that business rates are increasingly being viewed as a crude lever to extract cash from hard working entrepreneurs."

He added: "This research shows George Osborne really has to consider – and seriously – making a credible concession to small business in the budget on this moot point. If rates keep charging upwards then businesses are going to go bust – it's as simple as that."

The British Retail Consortium (BRC) is calling for Osborne to freeze business rates in the 2013 budget. A study by Oxford Economics for the BRC found that the cost of doing business on the high street has risen by 21% since 2006 and yet sales have increased by just 12%. The major costs facing retailers are business rates, utility bills and rent.