It’s grim down south following premises revaluation
Monday, June 19, 2017
There were always going to be winners and losers when, following the recent revaluation, the new business rates bills started to land on doormats in April.
And while the majority of businesses actually benefited from rates reductions, for the unfortunate few that were hit by significant bill hikes, help was, in theory at least, at hand.
In his Spring Budget, chancellor Philip Hammond announced a string of relief measures to soften the impact for those adversely affected (see below). Something that was welcomed by BPIF chief executive Charles Jarrold.
“We talked to our members quite extensively when the evaluation was originally going on because, especially in London, we had a lot of feedback of there being very significant increases in business rates,” he says.
“With the initial announcement a number of organisations had put intense pressure on and this might have been the straw that broke the camel’s back but overall the government have been keen to say this [revaluation] is fiscally neutral.”
But, as the saying goes, a plan is only as good as its execution, and since the new rates were announced it seems that while the government issued what it thought were clear guidelines to local authorities on how to pass on the relief, there seem to be varying degrees of confusion at a local level as to who qualifies for relief and to what degree. Worse still, some of the most affected authorities are yet to receive the actual funding to pay for it.
Since the changes were made, rates specialist Commercial Valuers and Surveyors (CVS) says that just shy of 25,000 SMEs have lost all or part of their relief and a huge number are not receiving any of the new relief promised by the chancellor’s magic funding pot.
Ian Cass, director of the Forum of Private Business (FPB), says that over the past three weeks his organisation has received around 70 to 80 business rates-related calls, five times the usual number.
“To be brutally honest this has been an issue for quite a number of years, and successive governments have fudged their way around it,” says Cass, who highlights Suffolk, Kent and the south London boroughs as being the worst affected.
The Federation of Small Businesses (FSB) concurs, its chairman Mike Cherry cites the hard work of the FSB in helping establish a £300m hardship fund and fears that further delays and “inflated bills” could have a serious impact on SMEs.
“The first order of business for the communities secretary in the next government should be to get a grip and make sure the promised help is delivered in the first month of office,” he says.
While the Department for Communities and Local Government (DCLG) has now urged local authorities to “deliver the scheme through the use of their discretionary relief powers”, the situation remains a mess and local authorities are unsure what to do. And while it’s the ailing state of the UK’s high streets that are the frequent focus of reports on business rate hikes, the reality is that print is also feeling the pinch.
Business rates were an enormous factor in halting a proposed premises relocation for Felixstowe-based Flyer Press but it instead chose to hang on to its two current units and continue to receive its 100% rates relief, a choice validated by the recent installation of a B2 Komori press.
“A big factor in not moving was rent and business rates,” says its managing director Jon Trotter.
“We are the small guy, a lean-running company, but when you get to the Micropresses [Suffolk-based 160-staff commercial printer] of this world, how are they going to deal with the changes?”
As PrintWeek goes to press, Micropress, whose revaluation has led its rates to rise by more than 25%, has called in CVS to help it lodge an appeal with its local authority and gain some relief. While Micropress financial controller Steve Wilson says the rateable rise is by no means enough to sink the business, all costs have to be watched.
Wilson says: “Our rates have gone up significantly but this is nothing compared to small businesses in Southwold [Suffolk seaside town]. I’ve seen signs in Southwold saying ‘177% increase’, people were so angry when they first heard about the increases that they put up plaques in outrage.”
Just like Wilson, Debbie Hall, founder and account manager of Buckinghamshire-based Orchard Press, is lodging an appeal, against a “ridiculous” rise that she says has seen her rates increase from £84 a month to £384 a month, way above the £50 a month maximum increase instituted by Hammond.
Hall has been in touch with the chief executive of Milton Keynes Council and her local MP but has got nowhere and is struggling with the council’s antiquated system. For now, the council has frozen Orchard’s rates at £84 while it updates its system but Hall is aware that she could be served with a hefty backlog bill at any time.
“When they have charged high rates on units in Olney [Buckinghamshire] it’s impossible for people to sustain, so they go out of business within a year or two and move on. I accept the rates were too cheap, I do agree with that, but £150 a month I thought would be about right,” she says.
It has now been three months since the rates increases and the vast majority of businesses aren’t seeing the relief that the chancellor promised them.
In a world where turnover is vanity, profit is sanity yet cashflow remains a reality, any potential increase in an SME’s monthly outgoings was never going to be welcomed. But when it takes the form of a postcode lottery, the pill is doubly bitter.
The business rates rises explained
While a large number of businesses have seen their rates either fall or stay the same, rises in the south of England have been significant.
Rates thresholds for those entitled to relief have increased from £6,000 to £12,000 or less for 100% relief and between £12,000 and £15,000 for entitlement to ‘tapered relief’.
However, the revaluation has led to a situation where a number of smaller ‘cliff-edge’ businesses have lost either tapered relief or their relief entirely, while some large companies have seen huge increases.
To stem the problem, Philip Hammond announced in his spring budget a £115m relief pot for those cliff-edge businesses, to cap increases to monthly rates payments at £50, with a further £300m in discretionary relief for local authorities to help those facing the biggest rises.
While the discretionary relief fund can now be dished out using billing authorities’ discretionary relief powers, before being reimbursed by the government, local councils are facing confusion as to who is entitled to the relief and lack the funds or software to deliver it in the first instance.
If you think you’ve been unfairly treated, don’t suffer in silence – speak out
Mark Rigby, chief executive, CVS
Revaluations create winners and losers, but the reality is that under a business rates revaluation, nobody is a true winner because of transitional relief, which limits how quickly bills can rise or fall over the next five years. Those expecting to see a large drop in their bill because of their plummeting property value won’t feel an immediate benefit because savings are curtailed over the new five-year cycle.
Shortly before the Spring Budget I met with communities secretary Sajid Javid to discuss extra help for those facing the biggest increases in rates liabilities. My firm put forward a number of proposals and identified those on a ‘cliff edge’.
The chancellor then introduced three measures of support, collectively totalling £440m, which was welcome news. However, since the promise of this much needed relief, we have had our own clients contact us because their promised relief wasn’t reflected in their rates bills, causing concern.
A common sense approach is needed here; the government made it quite clear that this money was available yet councils are – through no real fault of their own – none the wiser as to how and when to apply it. Three direct debit instalments since the new tax regime started will have already have been collected, and the only people suffering are the small businesses not getting the relief they so desperately need and are entitled to.
My advice to those on a cliff edge is to not suffer in silence: inform your local council that you are entitled to this relief. But it goes without saying that all ratepayers should check their own rates liabilities thoroughly, and to know that this can be challenged by way of an appeal with professional support.
Has your business be en affected by the rates rises?
Alan Corkhill, managing director, Regal Litho
“I think it’s an issue, certainly here in Milton Keynes. Our rates have gone up by a percentage that’s not realistic compared to everything else and we will be appealing. It’s just not realistic what’s going on and IT has been an issue that was completely and utterly overlooked during the General Election. Prices are too low and the industry suffers from overcapacity and it doesn’t help that certain areas in the country are given advantages like help from the government and certain areas, like Milton Keynes, aren’t.”
Terrye Teverson, managing director, KCS Print
“We are a net gainer because our business rates have gone down due to where we are in rural Cornwall, so that’s of benefit for us. But in places like Cornwall, it’s tougher because we are farther from markets, so we have other costs. If we’re sending out 10 pallets a day we could easily be paying £400 over a company on the M4 corridor. So if our rates are a bit less it helps offset other costs for us being a bit farther from the market. Anything that comes down in this era of uncertainty is a good thing.”
Bridget Petty, commercial director, JPS Print
“Our rates went down by quite a small amount. We are in the North; I don’t know whether that had an affect, I assume it did, but ours went down by approximately 4.5%, although we won’t really feel the impact of that drop at all. We rent our office space and adjust our budgets according to the requirements but being in the North rents are way lower than in the South and central London. It’s a huge advantage. The odds are stacked against us in other ways like having to travel further, but this is definitely one benefit.”