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July 19, 2013

Rates are "killing the high street", says FSB

Business rates are as high as or even higher than rent for 13% of UK small businesses, according to a survey of 2,425 members of the Federation of Small Businesses (FSB). 

The poll found that 7% of respondents pay more in business rates than they do in rent, while another 6% pay about the same. The survey also shows that a fifth of respondents pay full business rates, with just three in ten firms receiving some form of rates relief, such as small business or rural rate relief.

The FSB is calling on the Government to give business rates a "radical overhaul". It describes the system as "cumbersome and overly complex" and wants the Government to undertake a formal review to make it simpler and fairer, as it is doing with other taxes.

John Allan, FSB national chairman, said: "There is no doubt small businesses across the country are struggling for survival. Indeed, business rates are one of the highest costs for most business after wages and rent, and for 7% of small businesses, business rates were actually higher than rent."

As the rates are based on rental values, they take no account of economic activity, says the FSB, and business rates on empty properties are "tantamount to a tax on no income".

The FSB is lobbying the Government to change the inflation index used to calculate annual increases from the RPI to the CPI to bring it into line with other government policies. Changing the indexation in this way, as recommended by Mary Portas, could help small firms on the high street, it says.

John Allan said: "The current rating system is a blunt tool for maintaining the Government's income even when everyone else's is shrinking. It takes no account of ability to pay or changes to economic conditions. It is based on rental values but only adjusts its valuation assumptions every five years. And it continues to use RPI for annual tax increases because it is normally above the Government's official measure of inflation, CPI."

He added: "Businesses will continue to be lost as a result of this outdated and unfair system. The Autumn Statement will need a wide range of measures to target relief at businesses most in danger, and it will need to talk to business about a major overhaul of the system. It doesn't work anymore; it is crushing small businesses and killing the high street."