Editor | 24 February 2017

Rate rises will benefit online retailers and coffee chains

Experts have claimed that the first revaluation of business rates since 2010 will benefit online retailers and high street chains, to the detriment of offline businesses and independent retailers.

Due in April, the controversial revaluation was initially welcomed by ministers.

The prime minister said that it was "right" for rates to change to reflect changing property prices.

Rates have fallen in some poorer areas, but big rises have affected areas where properties have increased sharply in value. Some areas have seen rate rises of more than 100%.

After a backlash from business leaders and Tory MPs, the government retreated from its position and promised to do more in the hardest hit areas.

The government announced that it will include extra measures to benefit those “facing the steepest increases,” in the budget in two weeks’ time.

Communities Secretary Sajid Javid said it was "clear to me that more needs to be done to level the playing field and make the system fairer".

But some experts believe that the government retreat does not go far enough, and want to see more fundamental business rate reform.

Business rate rise favours online retailers

One of the biggest issues that experts take with the rate rises is that they benefit online retailers over businesses with physical stores.

In analysing the changes, CVS, a business rates consultancy, found that the average London shop is facing a 14% rate increase, while online retailers who have large out-of-town warehouses will only pay an extra 2% on their rates.

The business rates system, some experts argue, does not reflect the way that modern business is conducted. And countless business leaders have called for fundamental reform to the broken system.

Business rate rises favour chain stores

There is also evidence to suggest that the business rate changes will impact smaller businesses more than larger businesses. Larger businesses operating across multiple sites will see business rate increases in some areas balanced out by smaller increases or decreases elsewhere.

Smaller businesses operating in a few locations are less likely to benefit from this national balancing act.

Queen of shops and saviour of the high street, Mary Portas, said that the revaluation of business rates was madness. She said that the new tax bill “will be the single biggest blow to independent shops since the financial crash.”

She also estimated that at least a third of the high street’s independent butchers, bakers and other retailers would die off and warned that the rise would lead to the return of “clone towns” where “the only ‘mix’ will be of charity shops, bookies and Costa”.

Rate reform, don’t hold your breath

Miles Grady, Director of CloudAccountant.co.uk said: “Sajid Javid has hinted at a desire to alter the balance between online and offline businesses.

“But it is clear that just a few weeks out from the proposed changes taking effect, the government is in a mess over this issue, so I would not expect to see any fundamental reform any time soon.”

How are business rates calculated?

Business rates are a tax on business properties like shops, pubs, restaurants, offices and factories.

The amount that businesses pay is based on how much rent could be charged on the premises. This is known as the rateable value.

This is combined with a ‘multiplier’ a figure determined by the government each year to set the final bill.

What can you do?

You can check the proposed new business rate on the government valuations website. Please note that the rateable value could change before April.

If you think the business rates system is in need of more fundamental reform, write to your MP to voice your concerns while the issue has some traction in parliament.

For more information visit www.cloudaccountant.co.uk or email team@cloudaccountant.co.uk