Struggling small businesses face court for not paying business rates

Almost 200,000 small businesses were summoned before a Magistrates Court last year due to unpaid business rates.

This is according to data obtained in a Freedom of Information (FOI) request by management consulting company, Altus Group, which fears that an “ever increasing” tax burden on high street retailers has led to the criminalisation of many businesses in the courts. Business rates increased by a further £847m (3.5%) across the board in April, totalling almost £25bn.

Data from the FOI request showed that some 1.24 million commercial properties across the UK incurred business rates in 2017. Some 15.16% of businesses in these premises had received a summons to appear before a Magistrate last year, amounting to more than 188,000 retailers.

Robert Hayton, Head of UK Business Rates, Altus Group, said: “Annual inflationary rises for the seven years prior to the revaluation pushed the tax rate from 41.4p in 2010/11 to 49.7p in 2016/17, meaning a rise of 20% in bills even before the revaluation came into effect, creating financial pressures.

“Add [in] to the mix the current, deeply unfair, system of downward transitional relief which severely limits the amount by which bills can go down, [and this] meant many businesses ended up paying disproportionately high bills in locations where local economies were underperforming and values had fallen.”

Last month, almost three-quarters (71%) of small business owners surveyed across the UK desired a simpler and more flexible business rates system. Meanwhile half of all small firms surveyed in the same report urged the UK Government to do more to help businesses claim business rate relief.

However, the Institute of Chartered Accountants in England and Wales (ICAEW) believes the Government views business rates as an “easy tax target” and an “increasingly easy source of Government revenue”.

John Boulton, Technical Strategy Manager, ICAEW, said: “British businesses face the highest property taxes in the OECD (Organisation for Economic Co-operation and Development), resulting in the last ten years showing receipts rising from £21bn to £29bn.”

Boulton suggested that the Government is giving no consideration to a commercial tenant’s profitability when determining business rates.

“A drop in sales is not directly reflected in a company’s rates, leaving it vulnerable to failure in a downturn,” added Boulton.

The Chancellor of the Exchequer, Philip Hammond, announced in his Spring Statement 2018 that business rate revaluations would be made every three years from 2021 onwards, ending the current five-year window. The Government believes a three-year window will ensure business rates offer a more accurate reflection of a premises’ market rental value

Date published 16 Jul 2018 | Last updated 16 Jul 2018