The system of business rates dates back to Shakespeare’s time
While many of you may be starting to think about what to put on your Christmas wish list, business groups have completed theirs – and submitted them to the chancellor ahead of this year’s Autumn Statement.
The priority for most of them is reform of business rates – a type of tax that is calculated according to the rental value of the property a business uses, and which dates back to the Poor Law established in 1601.
The complaint is that business rates are completely out of date and need a total overhaul.
For instance, in the age of the internet, businesses ask why should a company tax be based on the physical space it uses?
So, for example, Harrods and the online retailer Asos both have similar turnovers, of £716.3m and £769.4m respectively, but Harrods faces a business rates bill of £11.5m in 2014-15, while Asos is set to pay £935,000.
That’s because their properties have very different “rateable values”, worked out according to postcode and size. Based on a valuation date from 2008, Harrods was three times the size of the Asos property and is based in the affluent area of Knightsbridge, central London, while the Asos distribution centre is based in Grimethorpe, Barnsley.
‘Prohibitive’ Not only that, some companies argue that the rate is so high, it hampers growth and expansion in the UK.
“We pay 10 times more than our nearest plant in Europe,” says Helen Foord from the car manufacturer GM UK, and one of the companies that has written to the chancellor asking him to change the law.
Ms Foord says the way they are calculated at the moment doesn’t incentivise investment – in fact quite the reverse.
“Our plant and machinery is counted towards our hypothetical rental value, so when we invest in our plant and machinery to improve productivity… our business rates go up.”
Not surprisingly, the company wants plant and machinery removed from the current system.
Superdry logo The cost of business rates is hindering expansion, says Supergroup The clothes retailer Supergroup was also among the signatories of the letter to the chancellor.
It has warned that if the rate doesn’t come down, it will look at expanding its stores abroad instead of in the UK.
“It is prohibitive in certain parts of the country where we would like to open and it means that our attentions will focus more on the international business,” Supergroup founder Julian Dunkerton has said.
“We would love to open more stores in the UK, but there are some places where the business rates are so high it just doesn’t make sense.”
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