The business rates system needs a radical overhaul, says the Federation of Small Businesses (FSB).
According to a survey of 2,425 FSB members, almost one in 10 respondents say they are paying more in rates than rent. A fifth pay full business rates, with three in 10 firms getting some form of rates relief, such as small business or rural rate. Another 6% mentioned that their rates and rent costs are almost equal.
John Allan, national chairman, said: "The current rating system is a blunt tool for maintaining the government’s income even when everyone else’s is shrinking. It takes no account of ability to pay or changes to economic conditions.
“It is based on rental values but only adjusts its valuation assumptions every five years. Its treatment of empty property is tantamount to a tax on no income and it continues to use the RPI (Retail Price Index) for annual tax increases because it is normally above the government’s official measure of inflation, CPI (Consumer Price Index). The FSB wants to see a level playing field for all businesses.
"There is no doubt small businesses across the country are struggling for survival. Indeed, business rates are one of the highest costs for most business after wages and rent, and for 7% of small business, business rates were actually higher than rent.”
The FSB wants to see the government change the inflation index used to calculate annual increases from the RPI to the CPI to bring it alongside other government policies.