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Business rates: "a levy that hurts small firms"

31 August 2021

The Federation of Small Businesses is calling on the government to support small businesses by significantly reforming business rates - which it has described as "regressive and outdated".

Small firms should not be penalised with a higher business rates bill for greening their premises or improving staff wellbeing with new amenities, the Federation of Small Businesses (FSB) has told ministers.

In a letter to the government ahead of the autumn review of the business rates system, FSB national chair Mike Cherry said: "This is a levy that hurts small firms trying to do the right thing: if you put solar panels on the roof to aid your transition to net zero, or install ventilation to support the wellbeing of your staff, the Valuation Office Agency will advise your local authority that you should be paying more in business rates.

"As we look to aid the small business community's transition to net zero, and employee safety and wellbeing as we come out from the pandemic, this simply cannot be the right approach to taxation."

The FSB is urging policymakers to:

  • Stop penalising investments aimed at improving sustainability, such as solar panels, insulation, ventilation, recycling facilities and bike sheds - improvements that typically increase property values and raise rates bills;
  • Support high street recovery by increasing the threshold for 100% small business rates relief to £25,000;
  • Exempt all childcare providers from business rates to bring support across England in line with that provided in Wales and Scotland;
  • Remove a quirk in the system that means that firms operating across two premises are charged rates even if its total valuation should see it qualify for relief.

Mike Cherry said: "The government is absolutely right to overhaul a business rates system which often lets online retailers operating from remote warehouses off the hook whilst punishing small businesses that serve as community hubs" and he said that "we should be aiming to take more small firms out of the system altogether".

Cherry added: "Renewed efforts to ensure that rates bills are based on fair valuations are welcome and much needed - the more we can move to rolling up-to-date valuations, the more we can ensure this is a fair system fit for the digital age."

Written by Rachel Miller.

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