The Forum of Private Businesses believe small companies are now extremely vulnerable to the effects of increased business rates.

The leading lobby group pin-pointed the reform of the Empty Property Rate Relief as a main contributor to the financial strain on SMEs. The reform was enforced in April 2008, which meant businesses now only qualify for the 100% tax relief for the first three months, with industrial and warehouse premises being granted the tax relief for the first six months of vacancy. After this period, companies are liable to pay the Non-Domestic Business Rate in full.

The Royal Institute of Chartered Surveyors also expressed concern over SMEs ability to cope with this additional financial burden. The reform was imposed without consultation and charged ahead of the official review of tax exemptions and relief by the Lyons Inquiry. RICS estimate that the level of reduction in the empty property tax relief will cost businesses in excess of £1 billion per annum.

To combat this growing problem, some larger firms have cleared their sites of their empty buildings. However, small businesses do not have the funds available to do this.

That said, more than £200 million in rate relief goes unclaimed every year. As such, SMEs are encouraged to make the application for business rate relief. Companies can claim up to 50% off their rates bills if their property’s rateable value is less than £5000. The Small Business Rate Relief (SBRR) however, states that if the value of premises rise, so will the rateable value – this equates to an increase of 1% per £100 over £5000. Once the property’s value reaches £10000, tax relief is no longer available. To be eligible for the relief, business are responsible for their own application, otherwise the charge will be assumed.

According the Forum of Private Business (FPB) many SMEs fail to take advantage of the relief because they are not aware of the scheme. Subsequently there is a great argument for local authorities to actively raise awareness so that small businesses do not miss their rightful opportunity to make substantial savings. It is believed that around £200 million in relief goes unclaimed every year in England. Nick Palin, the FPBs finance and administration director said: “The Government needs to do more to promote the scheme to help small firms, which, given the current economic climate, need support more than ever.” Local Government Association research reaffirms revealing that only half of the 870,000 qualifying small businesses across England apply for the scheme. Palin warned: “Businesses which have not yet applied for SBRR are running out of time.” The deadline for applications is 30th September.

Further hardship is imposed on small businesses as Business Improvement Districts pass on additional charges. As a public-private partnership, BIDs is designed to make improvements in key areas in exchange for additional rates. However, many small businesses have noted little improvement and are dissatisfied with the return on their ‘investment’.

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