Law change could slash costs for high street expansions

HM Treasury has launched an investigation into the impact on Small Business Rate Relief (SBRR) when a company opts to buy a second site.

HM Treasury published a report last week revealing the Chancellor will explore fixing the sudden jumps in business rates that appear when a firm expands. Known as “cliff edges”, these can discourage small business investment and growth.

Chancellor of the Exchequer, Rachel Reeves, said: “Our economy isn’t broken, but it does feel stuck. That’s why growth is our number one mission. We want to see thriving high streets and small businesses investing in their future, not held back by outdated rules”.

Stunting growth

SBRR is a national discount scheme administered by local councils on behalf of the UK government. In England, you can get SBRR if your property has a rateable value of £15,000 or less.

However, as outlined in the Treasury’s report, firms currently lose SBRR the moment they add another property, which can turn a modest move into a costly leap.

As The Treasury writes: “That means that a local bakery would have to pay thousands of pounds more for opening a small shop in the next village.”

Kate Nicholls, Chair of UKHospitality, agreed, pointing out that this system has been “…unfairly punish[ing] hospitality businesses”.

She added: “These measures to remove punitive cliff-edges and barriers to investment are positive and will help to rebalance the system, as will the government’s commitment to lower business rates bills for hospitality businesses.”

The report suggests change could be imminent but there is a caveat that this is an “exploration” and we are unlikely to see confirmation of changes until the Autumn Budget.

“A rare moment of common sense”

The report has been received positively by business owners and organisations alike.

Eamonn Prendergast, chartered financial adviser at Bromley-based Palantir Financial Planning Ltd said that the current system is no less than a “tax trapdoor” for business, “one step too far and small firms are hit with bills they can’t sustain”.

He stated: “Smoothing these jumps would give local shops, cafés, and start-ups the confidence to grow without fearing financial freefall.”

There are, however, views that the Government needs to do more, not least among hospitality business owners who have been hit hard by changes to employer National Insurance contributions.

As Samuel Mather-Holgate, independent financial adviser at Swindon-based Mather and Murray Financial, said: “Although business rates are in need of a restructure, most businesses are pleading with the Chancellor to look again at employers’ National Insurance as it’s this that is killing off growth for businesses desperate to expand.”

Others pointed to the current Corporation Tax rates and the introduction of the Employment Rights Bill as contentious with businesses.

It will be the unveiling of the Autumn Budget that will give SMEs a clear view of the future. It looks like positive changes will be on the cards; but as Tina McKenzie, FSB Policy Chair, said: “…the proof will be in the pudding at Budget.”