On the business rates rise

Business rates, which date back to 1601, are calculated according to the rental value of the property a company uses.

It leaves businesses with large premises paying huge annual fees, while online retailers that only need small buildings pay relatively low levies.

Yes, that’s the bloody point you fools!

17 thoughts on “On the business rates rise”

  1. +1 for the original point, plus

    while online retailers that only need small buildings pay relatively low levies.

    I’m guessing relatively low still means ‘Jesus H. Christ on a bicycle!’ when you open the envelope.

  2. while online retailers that only need small buildings pay relatively low levies

    Isn’t that balderdash? They need rather BIG buildings but they don’t need them in expensive positions.

  3. All rates need to go along with local councils.

    Business rates would be a good place to start –with services freed up to be offered privately.

  4. “The huge rise in rates in parts of the country has led to warnings that businesses will be left struggling to survive”

    Councils are going to set business rates so high that they lose business rates? I know councils fuck up, but when you look at say, the price of parking in most places, they get it about right.

    Despite all the “death of the high street” stuff, many places are still rammed full of open shops, like Bristol, Newbury, Reading and Bath. Smaller places, like Hungerford are the places that have really taken a hit. Shopping’s about agglomeration – if you want to buy a coat, a place with 20 coat shops has real advantages over a place with 1 coat shop. And more and more we’d rather do a bit of travelling for that to save time overall than just to go to local coat shop.

  5. @ TMB
    If the online retailer holds the stock in vast warehouses that it owns, then yes. But if it is *only* an online retailer selling goods held in warehouses owned by its suppliers and/or wholesalers, then no.

  6. @ BiW
    In my smallish town the problem is rents, not rates. OK, rates do cost and the proliferation of charity shops is partly due to rates and exemption therefrom, but rents are the bigger cost.

  7. Not forgetting that business rates are collected by councils and sent to central government to hand out. Councils only get to keep 50% of money from local business rates.

  8. @John77

    The value of a business property is set my the market. The rent is that value less the rates. There’s no point arguing over the split.

    Business rates are a good tax but the charity exemption is noticeably distorting and should go. Also, councils and landlords ought be more nimble so that properties which become uneconomic have their rent/rates sensibly rebalanced.

  9. @John77

    Thanks and, yes, I see that but I think that the cost of the warehouse will end up being reflected in the price the consumer pays for his online purchases.

    I grant you that just-in-time supply chains will reduce stock holding costs and large retailers both online and in business parks or out of town will reap the greatest rewards.

  10. Reluctant commentator

    “The value of a property is set by the market …” – well, up to a point maybe. It still prices out certain types of business and encourages others, because not all types of business are equally profitable per square metre of floor area. That does mean that (say) greengrocers will disappear, and (say) estate agents will proliferate.

  11. What a pity that the Poll Tax wasn’t introduced with more subtlety and good sense. If it had been carried off well, the whole business of Local Government finance might be healthier now.

  12. @ TTG
    Rates are set as a %age of deemed rental values at some historic date. Rents are re-set when the property is let or the rent-review clause triggers the review. So when the agent is re-letting an empty shop it is rent that is the sole variable. Locally the market says the rents asked are too high, so we have several “charity shops” and several empty shops – and the occasional proposal to convert a shop into residential accommodation..

  13. When somebody is so economically illiterate that they don’t understand that size does not equate to value, you can be confident that the rest of the article will be drivel.

  14. Business rates in a town centre high visibility spot will be high per square footage – so shops will tend to take that property. Only a fool would try doing a warehouse in such a location – a warehouse is set up to deal with stock, not customers. And can be in much cheaper areas and with much different facilities.

  15. If anyone thinks that rates are related to rental values they need their heads examining. A friend of mine runs a small restaurant in a small Welsh town. The local council has gutted the town centre over the last 10 years by allowing out of town centre retail parks to appear, and has recently put parking charges on the previously free car park near the town centre. The place is a ghost town, all boarded up shops and charity shops, plus the usual suspects like Wetherspoons. By any objective valuation the rates in that town centre should have dropped like a stone since the last revaluation – instead they’ve actually been put up by the new valuation.

    I think the valuations are not anything to do with actual rents, because how would anyone know what they are, it being private information? I think instead they do a reverse calculation – take known building freehold values per square foot, then work back using a % to what the rental value ‘should’ be. Which is bollocks because we all know that property values are becoming increasingly unrelated to the earning capacity of the asset – farmland for example is currently about £10k/acre, yet the earning capacity of the land (including subsidies) would be no more than £250/acre. Multiply that up at say 8% yield and you get a price of about £3k/acre.

    Basically commercial property prices have risen (mainly due to QE) over the last decade – that does NOT mean that rents have similarly risen, but the rates valuation process assumes one value is directly related to the other. And of course while the Valuation Office is nominally ‘independent’ it is still a State body and thus has a vested interest in ensuring rateable values remain as high as possible to keep tax revenue up.

  16. john77: when I was on planning the residential conversion applications we got were where the landlord had ripped out all the ancilary faciltiies – toilet, washing, storage – and then found to their surprise that they couldn’t get a tenant. I went the oppostie way, put in toilet, mini-kitchen, heating, store room, and have had 93% occupancy over the last 20 years.

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