Fruit stall outside London shop

Reform business rates to help small firms: FSB

28 September 2017

A new report calls on the Government to change the business rates regime to stop small firms in London from facing huge tax rises or even closures.

Shops and companies in the capital are bearing the brunt of an April revaluation that changed business rates – a tax levied on commercial property – for the first time in seven years.

Mayor Sadiq Khan has said high streets could be altered forever because of the rate hike, which is set to cost London businesses as much as £1.2 billion, effectively giving a tax cut to the rest of the country.

While England's rates have gone up 9.6 per cent on average, London's have risen 23.7 per cent, the report by the Federation of Small Businesses found. Almost a third of its members in the capital now plan to cut back on spending, while one in five will reduce headcount.

“Many small firms are still reeling from the business rates revaluation that took effect in April,” said Sue Terpilowski OBE, the FSB’s London Policy Chair. “The cost of doing business in London is blighting opportunities for small firms.”

While prosperous regions like London typically pay higher business rates than poorer ones, the same rates apply whether or not a firm is doing well – often hitting small firms harder.

“Of course London needs to pay its fair share, but the current system is unfairly skewed against the capital,” the Mayor, who is backing the report, said.

“The best solution would be full devolution of business rates to London, combined with genuine protection for businesses from sharp increases,” he said.

The FSB is calling for the small business rates relief threshold to be raised from £12,000 to £20,000 in inner London and to £15,000 in outer London.

It also wants revaluations of business rates to take place every two years, to keep rates in line with changing economic conditions.

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