Small firms to feel rates pain

The FSB is concerned that small firms with empty properties could pay thousands extra in rates with changes to the exemption from paying empty property rates due to come into force from April.

The exemption, introduced in 2009, meant that businesses with an empty property in England with a rateable value below £18,000 did not have to pay business rates. The Government plans to cut this threshold from £18,000 to just £2,600, placing a very significant burden on many small firms that are struggling in the current economic climate.

Just as alarming is the fact that the Government will not re-introduce a 50 per cent relief and that small firms will not be able to claim Small Business Rate Relief on the property.

This means that struggling business owners who have had to vacate a property and cannot rent or sell it will have to pay more in rates than if they were running a company from the property.

The FSB has written to local government minister, Bob Neill MP, to express its concerns that this move could put some small firms out of business.  If the threshold is going to be cut then the FSB calls for a return to the pre-April 2008 situation of granting 50 per cent relief or at the very least, allow a business to claim Small Business Rate Relief on their empty property.

Roger Culcheth, Local Government Policy Chairman, Federation of Small Businesses, said:

“The Government has said that small businesses have a vital role in driving economic growth and getting the recovery on a firm footing, yet for some businesses this additional tax could tip the balance and force them into insolvency.

“The result of this cut in the threshold without restoring the 50 per cent relief will make small business owners worse off than they were prior the 2009 change and significantly more so then they were in 2009 and 2010. We urge the Government to look closely at this matter and, at the very least, allow the business to claim Small Business Rate Relief.”

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One Response to this post.

  1. Posted by Max Allan on 20.01.11 at 4:09 pm

    Presenting the Government’s proposal to charge full rates on empty premises to House of Lords in 2007 Lord Davies of Durham stated “I remind the House that local authorities have discretion to provide hardship relief from empty property rates to respond to the realities of the commercial world by assisting owners facing particular difficulties in re-letting their property.”

    I own 4 floors of offices – all empty for a number of years – the top floor for 18 years. I have been trying to claim hardship relief – it’s a farce – in reality hardship relief is NOT available.

    Initially the Council (Medway) demanded sight of audited accounts. Audited accounts are only compiled for companies with a turnover of £3.5 million – not private individuals. I do not have any accounts – the premises are empty – there is no business activity. I pointed out the 1988 Local Government and Finance Act has always provided potential relief for owners of unoccupied premises. It was expanded by the 1990 Amendment to include occupiers of premises suffering decline in business activity and therefore difficulty paying rates.

    The council responded suggesting I provide personal bank statements to demonstrate I no longer had funds to pay the rates. As my personal account include income from pensions etc. I refused, on the grounds it amounted to means testing and implied I had to be bankrupt before the council would consider any relief. The legislation guidelines don’t define hardship, but Lord Davies referred
    to owners facing particular difficulty re-letting their premises – NOT owners facing financial difficulty paying rates.

    I have being paying unoccupied rates on 3rd floor premises for 18 years – evidence enough I have difficulty re-letting my property. But the council has closed the matter stating hardship relief is at the discretion of the authority. If I am not willing to provide the evidence required Council will not proceed with my application.

    Using the Freedom of Information Act I also requested the number of owners of unoccupied premises in Medway currently in receipt of hardship relief. Answer – none! It is likely councils throughout the country adopt the same policy. Because the relief is discretionary and requires councils to contribute 25% of lost revenue, every application is doomed to failure.

    This is a tax on unearned income with no correlation to ability to pay. In reality there is no possibility of relief until penniless.

    I believe it contravenes the Human Rights Act. Phillip Baker commentating on the Act stated “… all taxation must satisfy the principles underlying the Convention…… it must serve a valid purpose in the public interest….. the provisions adopted must be reasonable and proportionate means to achieve that end. In a small number of cases the argument has been made that the tax concerned imposed such an excessive burden as to be an interference with the right to enjoy one’s possessions.”

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