This weekend I have met with local businesses ahead of changes in business rates due to come into effect on 1st April, including Phil Simpson, one of the Directors of The Sun Hotel and Lancaster Brewery whose business has been particularly badly hit in the changes.
The Sun on Church Street in Lancaster will see its rates go up from £30,600 to £54,900 after draft revaluation – an increase of 79%. The company also own The Duke in Barrow-in-Furness which is seeing an increase from £12,285 to £61,200 - up 498%.
Business rates revaluation due to come into effect on 1 April have caused uproar as it has emerged that the average small shop will be hit by an extra £3,663 in rates over the next 5 years, while many large online retailers will see their rates cut. The ‘Big 4’ superstores - Tesco, Asda, Sainsburys and Morrisons - will see a 5.9% reduction in Rateable Value, while online retailer, ASOS, will see their rates bill fall from £1.17million to £1.14million, despite reporting UK retail sales growth of 18%.
Many local businesses are seeing increases in their business rates, but the figures for The Sun Hotel and Lancaster Brewery are staggering. At a time when high streets are struggling to maintain the range of businesses we all want to see – changes like this are hitting our local independent enterprises hard.
From delaying the revaluation to their failure to put adequate transitional arrangements in place, the Government have mishandled this whole process, and should provide immediate emergency relief to stop thousands of businesses going under.
But the reality is that business rates are a ticking time bomb. It cannot be right for smaller, town centre retailers like The Sun to be facing massive hikes while the Amazons and ASOS’s of this world have their business rates cut. Given our long-standing productivity problem, it is madness that we tax businesses’ equipment and machinery.
If you're a local business worried about the changes to business rates, please do not hesitate to contact me by email Cat.Smith.MP@parliament.uk or by phone 01253 490 440 or 01524 490 440.
Phil Simpson, Director of The Sun Hotel and Lancaster Brewery, said:
“Naturally this will have a significant adverse effect on our business. We have financial budgets and covenants with our bank that we must adhere to and this large extra tax will have to result in some significant cost cutting and the potential for redundancies.
“I was pleased that Cat Smith MP came to meet with me to discuss the impact this will have on our business as well as the wider issues in the sector given the general economic uncertainty caused by the Brexit vote, the enormous rises on the immediate horizon for food and drink due to Sterling’s weakness, new pension costs and the increases in the minimum wage are all making our job in the leisure business operators very difficult.”
Labour have responded to fears about the impact of looming business rate hikes for some businesses by calling on the Government to set up an emergency transitional relief fund and take a series of measures to ease the business rate burden for business. They are also holding an urgent meeting with leading business organisations to discuss a radical shakeup of business rates in the longer term.
Labour’s five point plan to help business survive the revaluation and develop a system of business taxation suitable for the 21st Century:
- Set up an emergency transitional relief fund for businesses facing “cliff edge” increases in their rates, and revise the appeals process to ensure businesses get a swift and fair hearing
- Bring forward CPI indexation so that businesses aren’t paying more because of how inflation is measured
- Exclude new investment in plant and machinery from future business rates valuation
- Introduce more regular valuations in law to stop businesses facing periodic, unmanageable hikes
- Fundamental reform of the business rates system to ease the burden on traditional high streets and town centres in the age of online shopping; support the traditional fabric of our communities, including community pubs and incentivising free cash machines; and create a fairer system of business taxation.
The changes have led to calls from businesses to reform the business rates system so that it better reflects changing shopping patterns.
Mike Cherry, National Chairman at the Federation of Small Businesses, said:
“Business rates are an outdated tax. FSB is keen for all political parties to help those small firms hardest hit by the current revaluation, and to start to focus on fundamental longer-term reform of business rates to make sure it’s fair for small firms. It is incredibly important to support small businesses and the self-employed so they don’t face shock tax rises, so we are delighted to take part in the roundtable.”
Andrew Silvester, Head of Campaigns & Deputy Director of Policy at the Institute of Directors said:
"It's hugely important that politicians on all sides look for constructive ways to reform business rates. This is a 20th century system and in a 21st century economy it looks painfully out of date."
Christopher Richards, Senior Business Environment Policy Adviser at the Engineering Employers Federation, said:
“Establishing the principle that plant and machinery has no place in the business rates system is an important first step for all political actors to take, this is the top priority action for industry. The inclusion of plant and machinery in business rates bills represents a tax on productive investment and undermines the international competitiveness of UK manufacturing. Excluding future investments from being taxed is therefore a significant step in the right direction, is consistent with the government's industrial strategy aims and if enacted would give some confidence to manufacturers about the likely post-Brexit investment environment in the UK.”