Experts say 'unfair' business rates system is hurting small companies

These are the views of the government’s small business commissioner Paul Uppal who visited Bolton this week to speak with company owners about the issues they face every day.

Mr Uppal was appointed to the newly created office last year and says he is often approached by business owners who feel penalised by rates.

The number of firms falling into insolvency hit a five-year high in the first three months of 2019 and the Federation of Small Businesses (FSB) has also pointed the finger at a business rates system it says is “unfair”.

The commissioner agrees, he believes that many firms in Bolton, and across the country, are unjustly impacted by the tax — which he says is “not fit for purpose”.

“It’s fundamentally a tax on a building,” Mr Uppal explained.

“It’s called business rates but it’s not business rates, it’s a property tax — so for a start call it by its proper name.

“Secondly, I think it’s an outdated tax in an increasingly online age where you’ve got your online operators who don’t have to pay any business rates or certain others with exemptions, why are some business penalised by this and others not?”

This view seems to be shared by many Bolton companies. Robert Downes, FSB development manager for Greater Manchester, said: “I totally agree with what he said. There’s a myriad of problems with the business rates system in this country.

“It dates back hundreds of years to when the system was first started.”

A major problem with the system, according to Mr Downes, is that it unfairly penalises “bricks and mortar” companies ahead of firms which only operate online.

This is because the rates are charged on the premises which a company operates from, and the rateable values of town centre shops can be significantly higher than an out-of-town warehouse used to sell products on the internet.

“Let’s say you have a business that makes USB sticks. They are selling their product through Amazon or another online retailer and they are sending their products straight to the consumers’ doors.

“Because of this, they can undercut high street retailers.”

The rates are collected by Bolton Council, but set by the government’s Valuation Office Agency.

A spokesman for the authority said: “As a council, we are keen to support local businesses in any way possible. Any business struggling with rates payments should contact our business rates team to ensure it is receiving any reliefs it might be entitled to.

“If a business disputes the rateable value of their property, they should contact the VOA immediately.”

The small business commissioner was visiting the borough to speak with company owners who could ask him questions about these issues.

While in the area he took a trip to Context Pneumatic Supplies, a family-run business in Tonge Fold which supplies parts to engineering firms.

Bob Leather is the managing director of Context and has been running the firm for 11 years.

He said the company has experienced a recent growth but that competition is tighter than ever, especially in the online sector where the firm does a lot of its business.

“It’s hard work and the margins are tight,” Mr Leather said.

“There’s a lot of competition out there and there’s a lot of online competition but we are actively online.

“It’s a big part of our sales. If you are not online you are not going to survive.”

In response to repeated calls to revamp the business rates system, the government has made a number of changes.

In April, chancellor Philip Hammond cut charges on smaller firms by up to a third in an effort to improve the financial situation for struggling high-street businesses.

Local Authorities can also bid for a share of £675m from the Future High Streets Fund, which aims to future-proof retail centres against changes in the market.

More than 300 councils have made bids for this cash and up to £55m has already been allocated to regenerating “heritage high-streets”.

This money can also be used to improve access and transport links in key areas or create new work spaces or venues.

High Streets Minister Jake Berry said: “The government has the power to set the direction but those on the ground know best.

“I look forward to reviewing the innovative proposals from local leaders to transform our high streets and town centres and make them fit for the future.

“We are determined to ensure high streets continue to sit at the heart of our communities for generations to come.

“Our Future High Streets Fund will sit front and centre of our Plan for the High Street as we work to achieve this aim.”

Who is the small business commissioner?

THE OFFICE of the small business commissioner was first established in late 2017 to give small companies a hand in chasing bills owed by larger firms.

The free service has now been operating for 16 months and has managed to recover around £3.5m owed to small businesses in the past six months.

Commissioner Paul Uppal meets with companies across the country to hear concerns around late payments and other issues that affect smaller companies

Explaining the work, he said: “The office of the Small Business Commissioner has been set up to help small businesses around the issue of late payment.

“So if you’re a small business and you’ve got a problem around the particular issue of being paid late by a big business please feel free to contact us.”

He added: “Above that, we have a lot of traffic through our website, we give advice and guidance to small businesses about what they can do.

“We cover the whole of the UK, over 50,000 businesses go bust every year over this issue of late payment so it really is a big challenge.

“When you’re a new business starting up it’s something that nobody really talks about.”