The new financial year will begin in April, ushering in several regulatory changes that you need to know about as a business owner, so you can manage your firm’s finances effectively. Business rates, for example, are set to rise, so here Turner Little explains what you need to know about this change.
Business rates
Business rates are a tax that companies pay to the British government, based upon the value of the property they operate from. This means that companies located in more lucrative property markets e.g. Central London, often pay far higher business rates than those situated in areas such as the North of England, where average real estate values are lower due to weaker demand.
You can reduce the impact of this tax has on your firm by applying for small business rate relief – which is only available to smaller enterprises. If you only use one property, which has a value of £12,000 or less, you currently qualify small business rate relief. One of the important dates you should mark in your calendar is 1st April 2017, as this is when Whitehall will change small business rate relief rules.
Policy changes
On this date, the government will raise the threshold for small business rate relief to £15,000, so if your property falls under this threshold your firm will get some form of discount. You will get 100% in small business rate relief, if your property’s rateable value comes in at £6,000 or less. Meanwhile, if your property’s rateable value registers at no more than £12,000 you will also benefit from 100% in business rate relief – which is a benefit which is available to all companies, no matter their size.
This is good news for small British companies, but any benefits may be offset by increasing business rates. According to Start-Ups, on this same date Whitehall will also alter the value of business rates, by taking into account rising real estate values. This is expected to bring about marked up-ticks across the board, with estimates suggesting that from April, business rates will come in at £17,000 for micro-businesses (those with under 10 employees). Meanwhile London-based firms are expected to see a business rate rise of up to 100%, as the capital is the country’s most valuable property market.
Knock-on effects
This is expected to “have massive consequences” for small firms and “shock… [their] growth prospects,” according to the Federation of Small Businesses (FSB). The business lobbying group found, while polling 675 members, that 44% believe that eventually, their business rates will increase to £1,000 a year, forcing them to implement unfavourable measures to safeguard their finances.
The FSB notes that a third of UK small firms currently face higher business rate bills. Of these, over half (54%) expect their profits to drop as a result. To tackle this problem, 55% will postpone, reduce or cancel investment in their enterprises, damaging their own and the UK economy’s productivity and expansion prospects, while 38% will increase prices, hitting consumers’ wallets. Almost one in five (19%) admitted that as a result of business rate rises, they may have to sell or close down their firm.
Business backlash
The UK’s business community is highly dissatisfied with the prospect of increasing business rates, and is expressing their objections. The FSB, for example, recently called on Whitehall to raise the business rate threshold in Inner and Outer London to £20,000 and £15,000 respectively, allowing smaller ventures to avoid paying the tax. This would deprive the government of £100m, but the FSB argues that this is a small price to pay, as Whitehall receives £28bn in business rates revenue annually.
The government is aware of the objections of the business community to rising rates. Sajid Javid, the UK Business Secretary, has admitted that the new business rate policy will negatively impact some businesses and has pledged to support these enterprises. This was echoed by Prime Minister Theresa May, who promised to support companies that “will be particularly adversely affected.” May has asked Chancellor Phillip Hammond and Javid to ensure that in these cases, “there is appropriate relief,” for the small businesses impacted, with the pair expected to announce more details this month.
Suggested measures
So what can you do, if you company is negatively affected by increasing business rates? You can start by appealing your firm’s new business rate, if you qualify to do so under the necessary grounds of appeal. You will need to lodge your appeal with the Valuation Office Agency (VOA), which sets business rates, and you should keep paying the new rate, while your company’s case is being heard. If you do not agree with the VOA’s decision, you can launch a fresh appeal to the Valuation Tribunal.
The appeals process can be time-consuming and in some cases expensive, as going to the Valuation Tribunal is free, but you have to foot your own costs. It may be more advisable to simply make your firm’s financial infrastructure more efficient, e.g. by cutting operating costs or switching to a better business bank account, so you can generate the cash needed to meet a high business rate. Turner Little can help here. As registered bank intermediaries, our team is well positioned to expertly advise your business on UK banking matters, allowing you to take greater control of your firm’s finances.
Turner Little
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider. You can receive our monthly newsletter by signing up using the form below.
