Retailers face 'unfair' 15.7% jump in business rates bills

Retailers in England are facing a 15.7 per cent average rise in their business rate bills, the Federation of Small Businesses (FSB) warned yesterday.

The group said business rate increases, to be disclosed in bills that are being sent out this week, were unfairly concentrated on retailers because their premises have risen in value alongside the country's property boom.

Business rates will actually fall for many other firms, particularly manufacturing companies, because their bills have been adjusted downwards after the five-year revaluation of business premises recently completed in England.

In the Budget this month, Gordon Brown said the Treasury was not expecting any significant rise in the revenues it earns from business rates in the 2005/06 financial year.

However, companies with business premises that have risen in value over the past five years will be hit hard by the rating revaluation. Roger Culcheth, the business rates chairman at the FSB, said: "Retailers across the south of England face the biggest hikes, because the revaluation of business premises has led to a huge increase in the rateable value of shops."

In addition to the increases related to the revaluation, business rate bills will rise by 3 per cent to account for inflation next year. There will also be a further 4 per cent increase to compensate for revenues the Government subsequently loses because it expects some businesses to win appeals against their revaluations.

The FSB warned that the tax increases would be particularly difficult for small businesses to manage. "Business rates are the second highest item of expenditure for most small firms and are five times more expensive as a proportion of turnover than they are for large companies," Mr Culcheth said.

However, Nick Raynsford, the Minister for Local and Regional Government, said small firms would be protected."Overall, the business rate increases are revenue-neutral after inflation, but we accept it is a mixed picture with winners and losers," Mr Raynsford said. "We have therefore introduced tax reliefs in order to help cushion the largest increases."

Firms struggling to cope will be entitled to claim transitional relief, to spread the cost of the rises. Small firms based in premises with a rateable value of less than £10,000 are also entitled to claim business rates relief. Firms with rateable values below £5,000 get 50 per cent off business rates, with the relief then applying on a sliding scale up to the upper threshold.

However, the FSB said many companies would still face sizeable rises next year, even after transitional relief. And it warned that in many areas the property boom has taken even small shops above the £10,000 business rate relief threshold.

The group pointed to one member firm, a toy shop based in Bournemouth. The business, Toys, Games, Models, is run single-handedly by the owner Neil Atkinson, who employs no staff. But the premises it occupies have been classified as having a rateable value of £11,500, resulting in a business rates bill of £4,500 a year. Mr Atkinson says similar shops in the area, which just qualify for business rate relief, will pay only £900.