We have put together some frequently asked questions below to explain more about the issues behind our campaign. You can also download the full FAQ document as a PDF – Business Rates FAQ (pdf).
If you have additional questions, please contact us.
1. What are business rates?
Business rates are a property tax paid on non-residential properties, such as shops, holiday businesses, factories, offices and pubs. Businesses are given rateable values based on the bricks and mortar property that they occupy. Around 1.8m commercial properties pay business rates in the UK.
The amount payable depends on the ‘rateable value’ of the property. This is calculated by looking at the annual market rent value using other rents in the local area to work out an average and this is reviewed every five years.
Whilst the Government states that business rates are not based on turnover or profit, some rateable values are. For example, self-catering businesses are rated at between 11% to 16% of gross turnover, or 50% of gross profit.
2. Why do we have business rates?
Business rates bring in around £28 billion per year to the economy – which equates to 3.6% of the total tax revenue. We understand that the Government needs to raise revenue, and that this is a business tax.
3. Are you asking for a decrease or an increase in business rates?
No. We are not asking for a decrease or an increase – we are asking for the system to be made fairer, ensuring all businesses make a contribution to UK PLC.
4. Do all businesses pay business rates?
No. Some non-residential property owners do not have to pay, including farm owners, charities, museums etc.
5. What about digital / offshore businesses. Do they pay business rates?
Online businesses either do not operate from commercial premises, or if they do, have a very small property footprint in proportion to sales and profit. Therefore, the amount they pay in business rates is disproportionate to their sales and profit. When this is compared with businesses who operate from ‘bricks & mortar’ premises, the amount of tax paid in business rates is disproportionately low.
These online businesses are not breaking any laws, but the system needs to change so that all businesses can compete fairly. A small high street retailer, for example, is not able to take advantage of loopholes and complex international tax arrangements. It is also unable to move out of town to reduce rental value.
6. Do you have any examples of this?
A huge number of successful online businesses operate from home, using the distribution available from eBay, Amazon and others to run substantial online businesses. A company like AirBnB for example can operate a huge business from a loft space in London.
7. What is wrong with the current system?
The fundamental issue with the current system is that it has been left behind by the digital economy. Business rates are a property-based tax, but in the last 15-20 years we have seen a massive growth in the digital economy/sharing economy/gig economy.
The growth of the digital economy has highlighted a number of anomalies in the current system of rateable values. The reality is that the percentage of turnover these companies generate is not in line with the tax they pay.
The result of this system is that businesses pay the following of gross turnover in business rates:
- A small business such as a small shop in Dorset, or a hotel group in the Lake District, or a holiday complex in Cornwall can pay 8-10%
- Most online businesses pay zero.
- Those that do have premises, pay a fraction of 1%. This includes very large businesses such as Facebook, Google and eBay.
8. Isn’t this just about a tax on the digital economy?
No. It is about making the entire system fairer for all businesses, so they all contribute on an equitable basis to UK plc.
9. I’ve heard that some discounts are available – doesn’t this help?
There are a range of complex schemes by which small discounts may be applied to business’ rateable value, but these are mostly temporary. Once these measures expire, these businesses are left with the higher rateable value and subsequent large increases in the rates bills.
10. What is the average that businesses pay in business rates?
This is a core problem – there is no average. Even in a very localised area, the business rates paid can vary hugely.
11. Can businesses appeal their rateable value?
Yes, however the system is difficult. Because of this complexity, it is also impossible for small businesses to work out, understand or appeal what their rateable value might be. In practice, the ‘Check, Challenge and Appeal’ system is so complex that it has made it almost impossible for small businesses to appeal their rateable value.
12. What is the Campaign for Fair Business Rates?
The Campaign for Fair Business Rates is the national campaign dedicated to making business rates fairer for everyone. We want to make the system a level playing field, standardising rates and criteria. We are calling for a full HMRC Public Consultation into business rates.
We understand that any replacement system needs to raise at least the same amount of money. The consultation should cover how the burden can be more equitably shared and consider reducing complexity in calculating and collecting the resulting tax.
Any new system of ‘business rates’ need to capture ALL Businesses. It is completely inequitable that some businesses make no contribution at all to this tax, whilst others are paying in excess of 10% of gross turnover. Why should just some businesses have this additional tax?
Any business with a rateable value of less than £12,000 does not pay any rates. However, that leaves an unequitable set up. Whilst on the surface this sounds promising, this can still leave a tiny business with a massive rates burden. For example, a small shop in Sidmouth, turning over just the VAT threshold, is also having to pay almost 10% of gross turnover as its rates bill.
13. Isn’t this campaign just looking for a tax on digital businesses?
No. It is about making the system fairer for all, creating a level playing field, standardising rates and criteria for all businesses.
14. Are business rates a tax on the rural and coastal economy?
Business rates is a huge factor in the decline of rural, coastal and high street businesses, as they struggle to compete against online competition. We need to keep both the rural and coastal economies, and their high streets, vibrant. These are the local tax-paying employers and cannot compete with businesses that have a much lower tax profile.
15. When does this need to happen?
The date of the next Business Rates Revaluation is 2021. A full HMRC Public Consultation must take place before this date, otherwise the current, deeply flawed and unfair system will continue.
16. What do politicians say?
All political parties agree that the business rates system is not fit for purpose. The Conservative Party manifesto (2017) stated that they would review business rates. All major organisations agree that the root and branch review is long overdue.
17. Who supports the campaign?
The campaign is supported by a number of high-profile organisations throughout the UK including:
- Federation of Small Businesses
- The Tourism Alliance
- South West Tourism Alliance
The list is growing all the time – please click here to add your name to the list.
18. How can I get involved?
Our website www.fairbusinessrates.co.uk contains information on how you can support the campaign.
We need businesses from across the country to get involved and support the campaign to make our case to Government.
We are asking businesses to:
- Make a public declaration of support – complete the form and we will add you to the list of supporters.
- Complete the online survey – to get our story heard we need case studies. Please tell us your experience, so we can build up vital evidence.
- Write to your MP.
- Spread the word! Share details of the campaign with other businesses on social media using the hashtags #businessrates, #fairbusinessrates and #HMRC (more information on using social media is suggested below).
Find out more about how you can support the campaign on our Take Action page.
19. What media coverage has there been?
Business rates have attracted media coverage, including the following:
- Digital services tax could fund business rate freeze amid pub and dining ‘crisis’ – www.telegraph.co.uk/business/2018/10/07/digital-services-tax-could-fund-business-rate-freeze-amid-pub/
- Fix business rates says Asos amid threat of digital sales tax – www.theguardian.com/business/2018/oct/17/asos-beats-the-heatwave-to-increase-uk-sales-by-23
- Companies got just £21million relief from business rates this year as councils are urged to do more to help ailing high streets – www.dailymail.co.uk/news/article-5927309/Companies-got-just-21million-relief-business-rates-year.html
- Business rates system should be axed to ease the burden on high street shops, urges Vince Cable – www.dailymail.co.uk/news/article-6077041/Business-rates-axed-ease-burden-high-street-shops-urges-Vince-Cable.html
- Amazon (who made £9billion in UK sales last year) pays just £38million in business rates, investigation reveals – www.dailymail.co.uk/news/article-6029327/Amazon-pays-just-38million-business-rates-investigation-reveals.html
20. How can I find out more?
- To find out more about business rates, please visit: www.gov.uk/introduction-to-business-rates
- Take a look at the House of Commons briefing paper: http://researchbriefings.files.parliament.uk/documents/SN06247/SN06247.pdf
- Contact us