Local Councils May Withhold Small Business Rate Relief
Government plans for local councils to administer Small Business Rate Relief (SBRR) may mean fewer small firms receive a reduction on their rates bills, the Forum of Private Business (FPB) has warned.
Local government secretary, Eric Pickles, has announced that SBRR will be administered by local rather than central government “in a way that best serves local businesses and local needs”.
This means it will be at the discretion of local councils whether small firms receive rate relief. However, the change is unlikely to come in until April 2011 at the earliest.
FPB property adviser, Andrew Bacon of Leaseholders United, said that the system could result in many small businesses being refused a discount by their local council.
“The [recently announced] Localism Bill will allow local authorities to look after their own money, so they collect business rates themselves and are responsible for deciding which businesses get what discount.”
“If local councils don’t have the cash, or can’t raise it through the Business Rate Supplement scheme – where larger firms are asked if they will pay extra rates to supplement small firms – local businesses won’t get SBRR. It won’t be written out of legislation, but in practice SBRR is at the councils’ discretion.”
The Government has also announced that there will no longer be a legal requirement for businesses to submit an application form to request SBRR, but did not specify how they will receive it.
In addition, the small-business rate multiplier (used to calculate the percentage of the rateable value that you pay in business rates) will be applied automatically to eligible properties.
However, Bacon said that the benefit of the small business multiplier being applied automatically will be minimal.
“The small business multiplier is only 0.7 less than for larger businesses – firms pay 40.7 pence in the pound instead of 41.4 pence – so if you have a property of a rateable value of £12,000, which is typical for a medium-sized business, that will save you £84 a year. This is an insignificant sum.”
A spokesperson from the Department for Communities and Local Government (DCLG) commented:
“The FPB’s claims are unfounded. If a ratepayer is eligible for a small business tax break, local councils are legally required to grant it. We want to ensure these tax breaks are fairly targeted at genuine small firms or shops – without making it more expensive and benefitting big business chain stores.”
The DCLG also made it clear that local authorities have no discretion over eligibility criteria for Small Business Rate Relief, which is set out in legislation – The Non-Domestic Rating (Small Business Rate Relief) (England) Order 2004 (as amended)
Small firms in England are eligible for rate relief if their rateable value is below £18,000 (£25,500 in London). For properties with a rateable value of between £12,000 and £18,000, businesses get the small business rate – calculated using a lower, small business multiplier – but no further discount off their rates bill.
Firms in properties with a rateable value of less than £6,000 get 100% off their rates bill, and properties with a rateable value of up to £12,000 get a tapering relief on a sliding scale of between 0 and 100%.