Small firms slam UK business rates for being ‘regressive and outdated’

·2-min read
The FSB said business rates hurt small firms trying to do the right thing. Photo: Getty Images
The FSB said business rates hurt small firms trying to do the right thing. Photo: Getty Images

Small firms have said the UK's business rates are a major disincentive to invest in measures such as net zero environmental pledges and employee wellbeing, ahead of a government review of the system meant to take place in the autumn.

Mike Cherry, national chair of the Federation of Small Businesses’ (FSB), said: “This is a levy that hurts small firms trying to do the right thing: if you put solar panels on the roof to aid your transition to net zero, or install ventilation to support the wellbeing of your staff, the Valuation Office Agency will advise your local authority that you should be paying more in business rates.”

He said the tax is “regressive and outdated” and called for several changes, including urging the government to exempt all childcare providers from business rates and bring support across England in line Wales and Scotland.

He also wants the government to stop “penalising” investments aimed at improving sustainability and working conditions for employees.

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The FSB said the government should accelerate reforms that have seen some of the smallest businesses removed from the rates system, by increasing the threshold for 100% small business rates relief to £25,000 ($38,383).

 The federation also wants a “quirk” in the system removed that is currently causing a firm operating across two premises to be charged rates even if its total valuation should see it qualify for relief.

“Renewed efforts to ensure that rates bills are based on fair valuations are welcome and much needed – the more we can move to rolling up-to-date valuations, the more we can ensure this is a fair system fit for the digital age,” said Cherry.

Current business rates valuations are based on figures from 2015 and are not set to be changed until 2023 after the latest update was pushed back by a series of delays, including the impact of COVID-19.

Earlier this week the British Property Federation (BPF) said business rates reform is “long overdue”, ahead of the end of the government’s revaluations consultation on Tuesday.

In its submission to the consultation, the BPF said the current property tax system is “broken” and has “failed to respond to significant changes in the UK economy”.

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