Business Rates - Fair or Unfair
Discussion
Not a business owner but in our area (Scotland) there seems to be massive increase in business rates, understand the requirement for rates but when does it get to the point of Government Local Authority being just greedy and putting businesses and local jobs at risk.
The example I am going to use is a Hotel who's rates last year were £92,000 and this year have received a figure of £197,000. Yes an increase of £105,000, either they were paying far too little over the years or government / local authority see easy pickings.
Seems in the area there are varying % increases, should any increase not be the same across the board ?
How are these worked out and how are businesses meant to work to such increases that can / will only affect their business and employees.
Government Greed ?
The example I am going to use is a Hotel who's rates last year were £92,000 and this year have received a figure of £197,000. Yes an increase of £105,000, either they were paying far too little over the years or government / local authority see easy pickings.
Seems in the area there are varying % increases, should any increase not be the same across the board ?
How are these worked out and how are businesses meant to work to such increases that can / will only affect their business and employees.
Government Greed ?
tighnamara said:
How are these worked out?
The process is surprisingly transparenthttps://www.tax.service.gov.uk/view-my-valuation/
As for whether it's greed or not? You could say that about any tax.
dazmanultra said:
It's a very regressive tax in many ways and it contributes massively to the continued destruction of the high street and town centres where marginally profitable businesses are pushed into unprofitability by the tax. The big question is, what would you replace it with?
If you look at the books of any high street business, if the rates are enough to make one unprofitable then that's a business that's in serious trouble anyway.singlecoil said:
If you look at the books of any high street business, if the rates are enough to make one unprofitable then that's a business that's in serious trouble anyway.
But one that may survive a few more years without yet another tax. Providing it employs local people surely it's worth keeping alive rather than yet another empty town centre shop. singlecoil said:
If you look at the books of any high street business, if the rates are enough to make one unprofitable then that's a business that's in serious trouble anyway.
Not sure I totally agree...Yes, there is an argument that the business is close to the line financially - but a large number of businesses are lifestyle businesses - they are not setting out to build a huge business / make a fortune / sell out / expand / etc. If therefore a hotel as in the OP's example is run in Scotland by a couple for whom it is partly a business they love and partly a lifestyle they love, and where they employ a number of local people - it is very likely that £100k+ extra cost makes it unviable - a business which turns £30k profit for them to live off (bearing in mind that they have accommodation in the hotel anyway) is a viable business - on that basis £100k extra would push them way over their margins - that is not a business in serious trouble, it could simply be business owners who are content to work and live and not make a fortune...
singlecoil said:
If you look at the books of any high street business, if the rates are enough to make one unprofitable then that's a business that's in serious trouble anyway.
Most small, single outlet owner-run businesses are probably not far away from this either in patches or at the beginning when you're trying to get the business off the ground. You only have to look at the proliferation of charity shops in some towns to see what effect some form of (targeted) rates relief could potentially have though.
Lucky me. Rateable value for my office space in North Wales has dropped from £110/sq ft to £85/sq ft in the 2017 assessment.
That closely resembles expected rental value, which has dropped by about 20% in the past 5-10 years.
Still, as a landlord, the bill is a real kick in the teeth when an insolvent tenant has used up the vacancy period and left the units needing a £50k+ refurb. There's hardly a queue forming for office space in the region, nor much interest in purchasing vacant office space.
That closely resembles expected rental value, which has dropped by about 20% in the past 5-10 years.
Still, as a landlord, the bill is a real kick in the teeth when an insolvent tenant has used up the vacancy period and left the units needing a £50k+ refurb. There's hardly a queue forming for office space in the region, nor much interest in purchasing vacant office space.
akirk said:
singlecoil said:
If you look at the books of any high street business, if the rates are enough to make one unprofitable then that's a business that's in serious trouble anyway.
Not sure I totally agree...Yes, there is an argument that the business is close to the line financially - but a large number of businesses are lifestyle businesses - they are not setting out to build a huge business / make a fortune / sell out / expand / etc. If therefore a hotel as in the OP's example is run in Scotland by a couple for whom it is partly a business they love and partly a lifestyle they love, and where they employ a number of local people - it is very likely that £100k+ extra cost makes it unviable - a business which turns £30k profit for them to live off (bearing in mind that they have accommodation in the hotel anyway) is a viable business - on that basis £100k extra would push them way over their margins - that is not a business in serious trouble, it could simply be business owners who are content to work and live and not make a fortune...
dazmanultra said:
You only have to look at the proliferation of charity shops in some towns to see what effect some form of (targeted) rates relief could potentially have though.
Charity shops are a very poor example, whatever their rates bills. Their stock is free and their staff is free. No bloody wonder they proliferate!Interesting, but can't fathom such an increase, the hotel has 36 bedrooms, restaurant and function hall. Current owners have invested a lot of money over the last few years when they purchased the hotel from near ruin.
Area could be prime housing land.
Understand that rates have to be paid but just find such an increase as desperation and indicates how local authorities are struggling to generate cash.
Should government / local authority come to a point where they HAVE to stop taking and start reviewing internal areas such as their pension funding for all their employees.
Towns are been cleared of local businesses and turned into streets of charity shops which I believe pay no rates but yet there will be people at the top taking money out of the charity for salary etc.
I am all for charity but no town will survive only full of charity shops.
Another example in the area is someone purchased an old factory, been sitting empty for a lot of years, they are planning on building on the land, what is unknown yet.
This year they received a rate bill for £50,000 for an area that is currently making no money, seemingly if there is roof on the building rates can be charged.
What have they done, knocked the building down to remove building rates .
Area could be prime housing land.
Understand that rates have to be paid but just find such an increase as desperation and indicates how local authorities are struggling to generate cash.
Should government / local authority come to a point where they HAVE to stop taking and start reviewing internal areas such as their pension funding for all their employees.
Towns are been cleared of local businesses and turned into streets of charity shops which I believe pay no rates but yet there will be people at the top taking money out of the charity for salary etc.
I am all for charity but no town will survive only full of charity shops.
Another example in the area is someone purchased an old factory, been sitting empty for a lot of years, they are planning on building on the land, what is unknown yet.
This year they received a rate bill for £50,000 for an area that is currently making no money, seemingly if there is roof on the building rates can be charged.
What have they done, knocked the building down to remove building rates .
singlecoil said:
If you look at the books of any high street business, if the rates are enough to make one unprofitable then that's a business that's in serious trouble anyway.
Money spent on rates could be invested into growth or a whole host of other things leading to more jobs and employment.singlecoil said:
Charity shops are a very poor example, whatever their rates bills. Their stock is free and their staff is free. No bloody wonder they proliferate!
Charity shops are a very good indication of high street "health".Charities receive at least 80% (and IME regularly 100%) relief from business rates which landlords would have to pay in full on empty properties.
Therefore landlords are more than happy to let empty and difficult to let shops etc to a charity for sometimes a reduced rent just to save themselves having to pay the rates.
If you see a lot of charity shops it means there are not sufficient businesses to rent to properties available. Normally because the rent and rates are higher than many small businesses can afford to pay.
Combine this with councils who strike deals on rate holidays to get national businesses into big empty high street units and it gets even messier. Especially when (and I know of one specific case) where said national clothing retailer enjoyed 3 years free rates (at circa 40K) a year and then closed the shop and moved out.
Rates may or may not be fair but right now its not helping independent high street businesses grow and in some instances even survive.
tighnamara said:
Interesting, but can't fathom such an increase, the hotel has 36 bedrooms, restaurant and function hall. Current owners have invested a lot of money over the last few years when they purchased the hotel from near ruin...
You will have noted the example I gave earlier of a high street 40 bedroom hotel in Buckinnghamshire paying c. £40K. Does it not occur to you that perhaps the figures you have been given are simply wrong?jamoor said:
singlecoil said:
If you look at the books of any high street business, if the rates are enough to make one unprofitable then that's a business that's in serious trouble anyway.
Money spent on rates could be invested into growth or a whole host of other things leading to more jobs and employment.21TonyK said:
Charity shops are a very good indication of high street "health"...
I can think of at least three towns of varying sizes where charity shops are competing with normal retailers for space, and where there are no premises available to rent (I know because I have been trying to rent premises myself, and only managed it by catching one before it came on the market). The fact that both stock and staff are free gives them a tremendous advantage.I agree that a large proportion of charity shops probably indicates a difficult retail environment but I disagree about the relative effect of business rates versus the other costs.
What would really make a difference where there are a lot of empty shops is if landlords would accept that the value of their properties has dropped, and reduce the rents to levels intending shopkeepers could afford.
singlecoil said:
The fact that both stock and staff are free gives them a tremendous advantage.
I agree that a large proportion of charity shops probably indicates a difficult retail environment but I disagree about the relative effect of business rates versus the other costs.
What would really make a difference where there are a lot of empty shops is if landlords would accept that the value of their properties has dropped, and reduce the rents to levels intending shopkeepers could afford.
But what advantage in terms of business where the intention is to resell donated items? They are not directly competing with other businesses as such, only second hand shops (which they have all but replaced).I agree that a large proportion of charity shops probably indicates a difficult retail environment but I disagree about the relative effect of business rates versus the other costs.
What would really make a difference where there are a lot of empty shops is if landlords would accept that the value of their properties has dropped, and reduce the rents to levels intending shopkeepers could afford.
As for landlords, yes, totally agree. But, rates are directly linked to rental values AND don't forget small business rates relief for rateable values under 12K and reductions for rents under 18/25.5K
21TonyK said:
singlecoil said:
The fact that both stock and staff are free gives them a tremendous advantage.
I agree that a large proportion of charity shops probably indicates a difficult retail environment but I disagree about the relative effect of business rates versus the other costs.
What would really make a difference where there are a lot of empty shops is if landlords would accept that the value of their properties has dropped, and reduce the rents to levels intending shopkeepers could afford.
But what advantage in terms of business where the intention is to resell donated items? They are not directly competing with other businesses as such, only second hand shops (which they have all but replaced).I agree that a large proportion of charity shops probably indicates a difficult retail environment but I disagree about the relative effect of business rates versus the other costs.
What would really make a difference where there are a lot of empty shops is if landlords would accept that the value of their properties has dropped, and reduce the rents to levels intending shopkeepers could afford.
As for landlords, yes, totally agree. But, rates are directly linked to rental values AND don't forget small business rates relief for rateable values under 12K and reductions for rents under 18/25.5K
As for not forgetting small business rates relief, I've actually drawn attention to it twice in this thread. Rents and rates are of course linked, and if rents drop then so will rates, eventually. The ball is in the landlords' courts on that one.
singlecoil said:
The advantage is that because they are inherently profitable they can afford to take over shops which other businesses operating on normal margins would struggle to afford the rents on.
I don't think that is the case at all. I know two commercial landlords and neither would offer a tenancy to a charity shop unless they absolutely had to as they have to do so at greatly reduced rents as charities are largely able to pick and choose from empty units.The only reason they do it is to avoid paying the rates on the premises themselves. Hence my original post that the proliferation of charity shops is a good indicator of a high streets health in terms of viable businesses.
21TonyK said:
singlecoil said:
The advantage is that because they are inherently profitable they can afford to take over shops which other businesses operating on normal margins would struggle to afford the rents on.
I don't think that is the case at all. I know two commercial landlords and neither would offer a tenancy to a charity shop unless they absolutely had to as they have to do so at greatly reduced rents as charities are largely able to pick and choose from empty units.The only reason they do it is to avoid paying the rates on the premises themselves. Hence my original post that the proliferation of charity shops is a good indicator of a high streets health in terms of viable businesses.
But in my experience where empty shops are rarely available charity shops do indeed have an advantage. Also, landlords with empty units do NOT have to give charity shops lower rents. They may choose to do so and if they do then it will often be the rates (and the upkeep of the units) which will lead to that choice. They could try offering lower rents to normal businesses as well. Where that experiment has been tried it has worked very well.
Edited by singlecoil on Thursday 26th January 08:24
I have to say I am disgusted with this tax.
I took on a lease 2 years back and fortunatley for me It was under the threshold and therefore exempt.
I did contemplate looking at larger places which were infact just slightly more expensive but by the time you add in rates etc it became considerably more.
I find it day light robbery, and your right, they have a power over you which you cannot even fight or appeal. In times such as these when things are tough already they don't exactly help.
People say well it goes towards X Y Z - but lets be honest it doesn't or these so called managers are so bad with money that its wasted.
It really should be business people in these jobs that are good at getting the best prices FOR THE BEST QUALITY OF WORK.
Around my area larger places sit empty for at least a year and I think a lot of it is down to the rates etc
I took on a lease 2 years back and fortunatley for me It was under the threshold and therefore exempt.
I did contemplate looking at larger places which were infact just slightly more expensive but by the time you add in rates etc it became considerably more.
I find it day light robbery, and your right, they have a power over you which you cannot even fight or appeal. In times such as these when things are tough already they don't exactly help.
People say well it goes towards X Y Z - but lets be honest it doesn't or these so called managers are so bad with money that its wasted.
It really should be business people in these jobs that are good at getting the best prices FOR THE BEST QUALITY OF WORK.
Around my area larger places sit empty for at least a year and I think a lot of it is down to the rates etc
Edited by XMT on Thursday 26th January 10:17
XMT said:
I have to say I am disgusted with this tax.
I took on a lease 2 years back and fortunatley for me It was under the threshold and therefore exempt.
I did contemplate looking at larger places which were infact just slightly more expensive but by the time you add in rates etc it became considerably more...
If you had looked into the small business rates relief scheme you would have found out that going slightly above the threshold would not have led to a large increase in the rates. The scale is a sliding one, there is no sudden increase.I took on a lease 2 years back and fortunatley for me It was under the threshold and therefore exempt.
I did contemplate looking at larger places which were infact just slightly more expensive but by the time you add in rates etc it became considerably more...
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