Business rates: Council Tax on steroids

13 May 2011
A while back I wrote about how much it costs to employ someone. More recently I decided to look into non-employment business taxation, and as a start I looked at Business Rates. What I soon found out was that business rates combine the far-from-reality aspects of council tax with all the administration of sending money between different branches of government. And since business rates are a business expense rather than a profit tax, it is yet another way in which government sucks the life out of British business. And one wonders why so many high street retail units lie empty..

Each business property has a rateable value, which in theory mirrors the market rate for annual rent. This is then multiplied by a nationally set multiplier, which for 2011/12 is 42.6p for small businesses and 43.3p for others. In other words, business rates are supposed to approximate 5 month's rent. Of course, as with council tax, the rate valuations are borderline fiction. The last re-evaluation was 2011, and it used spot-prices from April 2008 as the bench-mark. Put another way the bench-mark was right before commercial rental prices crashed, so people are paying boom-time business rates at the depths of a slump. And the council still does not collect your garbage.

Naturally, thing get worse. Rather than tracking actual market rates, the rateable values are instead adjusted according to inflation, and the measure used is the RPI. Well that is the official line, which never mirrors reality anyway. When the RPI was negative in 2009, business rates were increased anyway. Well, apart from Wales which has a bonus layer of government bloat who (ironically) reduced it for those lucky enough to actually be based there. I wonder where those funds came from..

And a final thing: what is classed as business. The answer: anything non-domestic. To get an idea of how much of a bureaucratic money-sink the classification is, try finding out whether stables are classed as business or domestic. You might want to find out quickly as there is a big difference between council tax & business rates, but the council officials generally are not so speedy.