Talk Morgan Forums Community The Malvern Arms Business Rates

There was in interesting article in the Grauniad yesterday on the impact that the revaluation of business rates is to have on the shopkeepers of Southwold.

https://www.theguardian.com/business/201...omment-94629787

As you know, I'm a regular visitor to the town, collecting ale from the Adnams brewery. The place is up in arms, and I don't blame them. The average increase in business rates there is to be of the order of 177%. As things stand, Southwold High Street has a pleasant mix of shops, many of them independent, which is one of the attractions of the town for tourists. All over the country we hear complaints of the disappearance of small shops and the preponderance of national chain outlets, pound stores and the like. This sort of rate increase may well drive some of these shops out of the town and others out of business.

To me it seems pretty bizarre that small businesses are effectively being punished for a property boom in their town; surely some sort of tax on the profits of the company rather than on the theoretical rental value of the property it occupies would be fairer. If anything, the property boom has made life more difficult for shopkeepers outside of the holiday season, with 57% of the properties now second homes or holiday lets. All very well during the summer, but Southwold is pretty quiet during the week at other times. House price inflation in the town has put housing completely beyond the reach of young local people; even the head brewer can't afford to live there !!

Southwold is not alone in this. Many seaside towns in Devon and Cornwall suffer the same problems.

Local taxation is surely an area which should be more in the hands of local government than decided in Westminster. It would seem more appropriate to allow them decide for example to charge double or treble rates on second homes, maybe with exceptions for holiday lets which bring in tourists rather than whacking the local shopkeepers.

I cant say that I understand the Treasury making a decision to increase business rates. Especially at these enormous amounts.

Most businesses that will be adversely affected will surely pass most, if not all the costs onto their customers - who will then shop around (excuse the pun) potentially on the internet and look for goods cheaper.

This could lead to the business closing or operating on line out of a garage (dependant on business type) and another empty shop and yet another charity shop opening up having obtained a business rate reduction.

It does not seem a great way to get the local economy up and running. Especially as those small shops employ one or two staff who live locally.

To my mind a reduction in business rates should have been on the cards. If shops charge more to their customers the customers will have to economise, public spending reduces, VAT returns reduce and we get in to the old cycle where taxes have to go up as an enforced way of bringing money into the governments coffers. No one wins in this situation.

Happy days - I am sure thy know what they are doing..

These would be the same business rates which haven't been reviewed for the last seven years then?

Arwyn

I fully accept that there's a need for business rates to increase to keep up with inflation, but what I find so distasteful about this increase is that AIUI the levels set by this review are based on the amount of profit that could theoretically be generated from the premises.

It seems to me that the result is that all the interesting small shops, pubs, and town centre businesses will inevitably be driven out, to be replaced by enterprises able to generate maximum cash. Betting shops, fast food outlets, and so on. All very well for the disciples of profit above all, not so nice for the communities.

I quite agree, and what makes it even worse is that overall tax revenue doesn't actually increase either - high rates of tax act to reduce revenue across the board. Much better to set tax levels at levels which people consider to be reasonable, and then stimulate activity to get people spending.

Has anyone read the briefing paper?

researchbriefings.files.parliament.uk/documents/CBP-7722/CBP-7722.pdf

Overall the rates revaluation will not increase revenues because for one thing the multiplier drops slightly in England to compensate for the average increase in values (in Wales the multiplier is up slightly as average values have fallen) and for another the 100% relief limit doubles from £6000 to £12000.

The problem appears to be one of winners and losers, especially as some of the losers see a huge increase because they move out of a 'relief' category.

My own property sees a small increase in rateable value which is more than covered by the 100% relief.

Maybe it would have been fairer to leave the 100% relief figure at £6000 and reduce the multiplier by a larger extent but there would still be winners and losers.

There is some misunderstanding here. Business rates are much like private rates - a tax to pay for local services based on the value of the property you have in the locality. Its merit is that its easy to collect - no argument about income, no room for evasion or avoidance. Its big disadvantage is that property prices arent stable so every so often you have to have a revaluation which is what is happening here.

And it is a poisoned chalice for politicians. House values are still fixed at a notional 2005 value simply because any change would bring riots. Voters might want public services but they want someone else to pay for them.

Which of course is what happened when Maggie did change the system to a much more logical Poll Tax. Everyone paid the same for local services just as they would pay the same for trousers at M&S. Didnt matter that it was much fairer, people didnt like it. There never is acceptance that any change brings losers as well as winners. The public expects just winners.

As for the business rate change, what you dont seem to have picked up Pandy is that its a zero sum game. There are as many businesses getting reduction as an increase. And isnt it better for the rich southern areas to pay more and the poor northern ones to pay less?

Even the issue of house prices isnt straight forward. many of the Soutwold people moaning about house prices wouldnt, if they were house owners, want them to fall and most wouldnt want large scale housing development which is the only way that house prices will fall.

One issue I see is those who need bricks and mortar shops and the likes of the online warehouses. As Giles notes (albeit for slightly different reasons) this could cause a decrease in the "high street" as the gulf widens and competition becomes further distorted.

The value of the property is an asset of the company. Maybe a tax based on increased value on the sale would be a better option for the long term ?
If I sell the property I am renting out I pay tax on the sale.
As for the ongoing rates then as much as possible should be based on measurable needs such as the cost of waste collection etc.. water is metered, power is metered, gas too, so you pay for what you use.
The issues that will cause uproar are in other services such as schools, police, leisure, libraries etc. As these are for the population then domestic rates would be a more appropriate source for rates revenue.
Our town centre is poor especially since the out of town shopping area was built. Attempts are in place to regenerate but higher rates would kill off a lot of gains.
I do not know enough about the whole business rates scenario but I think it is a dangerous road to go down as in many areas the economy is seriously depressed and businesses on the brink. Many will be pushed to closure.
This is an income source for the treasury that is a poorly thought out one....yet again.

It's only as asset if you own the freehold. Most small businesses don't, and for them, rising rental values (and rateable values too) are not a good thing.