UK retailers to face hefty increase in business rates

It is the news no retailer is waiting to hear, a hefty increase in business rate tax starting in 2017.

As Britain prepares to leave the EU there will be many uncertainties brands and retailers will face. Retailers must now take on board their business rates are set to rise next April by 465 million pounds per year over the next five years. The total tax bill will increase to approximately 2.3 billion pounds.

For many companies there are lingering grey areas regarding importing tariff free products from the EU following Brexit and a steep hike in taxes in times of uncertainty may make many brands and shops vulnerable to stay in business.

According to the Retail Gazette, business rates are based on the value of commercial property as plus the annual rate of inflation. Retailers have warned that the levy is overwhelming them as they rely so heavily on property, on which the majority spend more tax on than they do for corporation tax.

The government previously postponed the revaluation

Controversially the government pushed back the commercial property revaluation by two years, deviating from the usual five-year recurrence. They stated that it would create uncertainty among businesses, this will make the changes even more harshly felt when they come into effect.

“The retail sector is facing a significant shift in structural dynamics, with most reporting challenging conditions ahead,” the chief executive of property agent CVS Mark Rigby told the Retail Gazette.

“Add to the mix the already ‘lethal cocktail’ of increased operating costs from the national living wage and apprenticeship levy, and a near half a billion pounds increase in business rates per year for the next five years is simply unsustainable.:

The Prime Minister has pledged to lower corporate tax

According to the BBC, Prime Minister Theresa May is expected to tell the Confederation of British Industry "my aim is not simply for the UK to have the lowest corporate tax rate in the G20" but also a tax "that is profoundly pro-innovation."

The business rate tax is an out-dated and unhelpful business rates system in England that was introduced in 1990. The Federation of Small Businesses (FSB) states it is unfair as is unrelated to the ability to pay, or changing economic circumstances. Their research shows seven per cent of small firms pay more in business rates than in rent. Business rates are consistently the third highest cost after staff and rent.

Photo credit: Regent Street, source: Visit London online