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Business rates - time for a reform?

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A report from the Business Innovation and Skills Committee states that the current system of business rates is in need of fundamental reform. This follows comments from Sir Terry Leahy last week that the system of business rates is an ancient tax that has not worked for years. The report has been welcomed by the British Retail Consortium.

Business rates are rates charged to businesses based upon the value of their premises rather than reflecting the turnover of the business or its actual sales. The focus would appear to be on the retail sector as this sector has been most hit recently with the adverse weather resulting in reduced sales, less than expected like for like sales and challenges from the online sector.  The high street, as many will see from the amount of empty premises, is facing an uphill battle and help must be given to avoid the disappearance of the traditional high street as we know it.

A demand for payment can quite often be the straw that breaks the camel’s back forcing a business to close and more often than not resulting in a formal insolvency procedure such as liquidation or bankruptcy. It has also been suggested that business rates are also the reason why investment and increasing work forces are being put on the backburner which in turn holds back economic recovery and growth. It seems peculiar that most taxes faced by businesses relate to income but business rates do not.

The Committee said that there should be an examination of whether rates should instead be based upon the value of sales. This appears on the face of it to be a more sensible option. However, there are arguments that the current system does work and is in fact a fair option for businesses as a whole. It has been stressed that any alternative method would need to be fair on all businesses as it is not only retailers that have to pay the rates.

If you have received a demand for your business rates which seems high or if your business is struggling financially, advice should be sought at the earliest possible opportunity. Stephensons have property and insolvency specialists who can assist you and your business in your time of need.

By Nicola Whittle, Associate solicitor in the commercial law team

 

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