New business rates legislation, proposed in the Government’s , will increase the administrative burden on small firms, encourage rogue cowboys looking to profit from vulnerable firms and will act as a “barrier to justice” for many businesses seeking to appeal, business rates experts and the UK’s leading business groups have warned.
The bill contains three new measures, which have all been criticised for “riding roughshod” over the .
Small firms have long called for more transparency around how business rates, or tax on commercial property, is measured.
But critics claims the bill has failed to address this issue, instead allowing the Valuation Office Agency, which handles business rates appeals, to share information around how rates are measured with local authorities but not with the individual businesses.
“In business rates, your own liability depends not on your own property but what’s being paid by lots of other people and you have no right to obtain that information,” said Jerry Schurder, head of business rates at Gerald Eve and the former chairman of the Royal Institution of Chartered Surveyors (Rics) Rating Panel.
“In any other tax, the taxpayer has the relevant information to make an appeal but not on rates.”
The Government is also seeking to discourage business rates appeals from being made by introducing an upfront fee, in a bid to reduce the crippling number of active investigations in the system – .
However, this will discourage genuine appeals by businesses and could prompt by cowboy ratings firms.
“These organisations could use any of these proposed changes as another means of persuading a small business to pay money upfront to employ them,” Mr Schurder said. It is not clear how much the VOA intends to charge businesses seeking to make an appeal.
Finally, the bill proposes a “civil financial penalty” on any firm that “knowingly, recklessly or carelessly provides information, which is false in a material particular”.
But this could catch out innocent business owners who are confused by the opaque system.
Small businesses now bear the brunt of the administration and cost for lodging an appeal.
“They want to use the stick to prevent businesses from appealing when a carrot approach would do the job,” said Mr Schurder. “It’s a barrier to justice for small firms.”
The UK’s leading business groups have criticised the Government for attempting to push through draconian changes that were abandoned in the face of industry opposition back in 2013.
“The current business rates system harms companies by relying on a decades-old model that no longer reflects economic conditions, which has made life tough for retailers in particular,” said Rhiannon Jones, the principal tax policy adviser at business lobbying group, the CBI.
“Any future changes must make it easier – not more difficult – for small businesses to get on with creating jobs and growth, rather than dealing with unnecessary and restrictive bureaucracy.”
“While we support moves to make it easier to navigate business rates appeals, we have concerns around the proposals in the Bill,” added John Allan, national chairman at the Federation of Small Businesses.
“Their primary aim seems to be reducing the number of appeals by making the process more difficult, rather than by addressing the underlying issues, in particular making the appeals system and the Valuation Office Agency more transparent.
“If increased transparency is not delivered, then confidence in the business rates system will continue to be undermined.”
The retail industry has warned that 80,000 shops could close by 2017 without an overhaul of business rates Photo: PA
Last month, a poll of 100 retail businesses by the British Retail Consortium found that . Retailers are now paying £2.40 in business rates for every £1 in corporation tax.
“Far from creating something that is clearer, fairer and simpler, the Government is proposing a system that adds up-front costs, creates more work, is skewed against smaller firms and promotes unethical behaviour,” Mr Schurder claimed, adding that the measures have been published without any consultation with industry or ratings experts, “riding roughshod over valid concerns about the ratings system”.
“It will achieve the exact opposite of what good legislation is intended to do,” he said.
The Enterprise Bill, which aims to support the UK’s new and growing businesses, and has yet to be voted through Parliament.
A spokesman for the Department for Communities and Local Government said: “The Enterprise Bill will benefit businesses by speeding up the appeals system and making it easier to navigate.
“This will ensure businesses receive reductions in their rates more rapidly. We will be consulting shortly on our proposals.”
Business rates are forecast to bring in £28bn this year to the public purse, the Government’s sixth largest stream of revenue after income tax and national insurance.
George Osborne announced in the summer Budget that retailers would face a £4.9bn increase in business rates – equivalent to 17.5pc – by 2020.
Business rates, which date back to 1601, are currently calculated according to rental values.