In 2017, almost 200,000 small businesses received court summons due to unpaid business rates. Figures suggest that more than 15% of all businesses run from commercial properties in the UK received a court summons last year.
New business rates in 2017
The business rates revaluation of 2017 has been a problem for small businesses, while helping larger companies to benefit. It was the first change in seven years and has made business rates an ongoing point of contention for small businesses in the UK.
Major hikes in business rates were seen for businesses based in big cities, but there have been some reductions for a number of businesses in less wealthy towns and in rural areas.
While the reductions may have been welcomed by some, High Street retail groups have been vocal about the fact that reductions also benefited major online sellers. This is because huge companies like Asos and Amazon tend to locate their massive warehouses in poorer areas, so that they can cut their rates. For example, online fashion ecommerce giant Asos has experienced a rates bill decrease of 0.8% since 2016-2017. This hardly seems fair for small businesses struggling to make their way in established cities.
Huge increases
As the revaluation of 2017 had been delayed by two years, there had been large increases for some businesses, and it’s become difficult for many to cope. Small and medium sized businesses in London have particularly struggled, with some facing business rate increases of more than 100%.
Business groups are asking the Government to reassess the system. Increasing the frequency of business rate revaluations, for example, would help to spread out the likely increases over a number of years. This could make it more manageable for smaller businesses.
In response, the Government have said that they next revaluation will be in 2021, a year earlier than previously planned. Further revaluations will take place every three years.
Rising inflation
Following the shock of the new rates, they rose again in April by 3% in line with inflation. This further increased the pressure for many SMEs in the UK, as average rates went up from 41.4p to 49.7p in the seven years prior to 2017.
Traditional retail needs property, as it relies on bricks and mortar outlets. This has meant a huge rise for shops and services on the High Street, and in the cities, and if it carries on in a similar way could lead to the total extinction of the High Street as we know it.
James Turner, managing director of turnerlittle.com said: “It’s the only business tax that doesn’t relate to the ability of the business owner to pay. It’s a huge burden for sole traders in particular, as they could face jail sentences, while businesses that have incorporated into a limited structure face going into administration over non-payment of business rates.
“The fact remains that the changes have increased the struggle for many small businesses in the UK. It’s hoped that the Government will reassess the way that business rates are incurred and spread out the increased cost in future, rather than suddenly hiking them after a delay of so many years.”
About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and Offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.
