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This mistake has landed 200,000 small businesses in court

2-minute read

Josh Hall

30 July 2018

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Nearly 200,000 small businesses received court summons last year over unpaid business rates.

Figures collected through a Freedom of Information request made by management consultants Altus Group suggest that over 15 per cent of all businesses in commercial properties received Magistrate Court summons over unpaid rates during 2017.

Big businesses benefit from rate changes

Business rates have been an ongoing point of contention for SMEs. Rates changed in 2017 after the first revaluation in seven years, leading to major hikes for businesses based in major cities. Meanwhile the revaluation also led to reductions in rates for some businesses in rural areas and poorer towns.

However, High Street retail groups have pointed out that the rate reductions also benefited major online sellers, most of whom locate their warehouses in the sorts of areas that saw rates fall. Online fashion giant Asos, for example, has seen its total rates bill fall by 0.8 per cent since 2016-17, according to Altus.

Delay causes huge rate hike

The 2017 revaluation had been delayed by two years, which resulted in significant increases for some businesses. Those in London bore the brunt of the new regime, with some businesses facing rate hikes of more than 100 per cent.

Business groups have pressured the government to review the system, and to potentially increase the frequency of revaluations in order to spread the increases over time. The government ran a consultation on the idea in 2016. They announced that the next revaluation will be brought forward by a year, to 2021, and that subsequent revaluations will occur every three years.

Inflation adds to pressure

Rates rose by a further three per cent in April in line with inflation, adding to the pressure for many UK businesses. Inflation-pegged increases pushed average rates up from 41.4 pence to 49.7 pence in the seven years before the most recent revaluation.

Commenting on the figures, Altus Group’s head of business rates Robert Hayton said: “Traditional bricks and mortar retailing is property intensive, leading to a larger tax to turnover ratio and, if left unchecked, could lead to the substantial extinction of the High Street.

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