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Shops, restaurants and other businesses in prime London areas could see tax rates almost double this year, Westminster council is warning.
Analysts say the move punishes successful firms and threatens to undermine the City's economic recovery.
Business rates for some firms in the West End, Mayfair and Paddington are likely to rise by up to 100 per cent — a tax bombshell costing around £500 million.
Westminster council predicts that the new taxes — details of which could emerge as soon as today — may force firms to make redundancies.
Business rates are reassessed every five years but valued at a fixed point two years before they come into force. The latest terms are based on rents in April last year, when property prices were at their peak before the recession struck.
The average bill across Westminster will rise by 38 per cent, predicts the council, with firms in the wealthiest districts hit hardest.
Brian Connell, a councillor responsible for overseeing economic development at Westminster council, said: “In areas such as Westminster businesses will be particularly hard hit.
“My concern is that some could be pushed close to the brink and lay off staff unless the Government introduces radical reforms to prevent the system unfairly penalising successful areas.”
But with Treasury finances in disarray, the Government is likely to argue that businesses in the most lucrative parts of London can afford to stump up extra.
Westminster already collects £1.2 billion in rates each year, more than the City of London, Birmingham and Manchester combined.
Keith Cooney, of property consultancy Knight Frank, said: “The publication of the draft rating revaluation list will bring unwelcome news for many businesses across the capital.
“The reason key figures in the industry have been calling for the revaluation to be abandoned will now become painfully clear.”
Although the rate revaluation is nationwide, Mr Cooney said: “It is clear the capital will bear the brunt of the increases.” He added that the new charges should be capped.
Business leaders say the tax rise threatens to derail the economic recovery and could even lead to another recession.
Richard Dickinson, chief executive of the New West End Company, said: “The scale of these increases is chilling. Businesses will have no choice other than to cut costs even further than they have already.”
London Mayor Boris Johnson has already condemned the rate rises.
Reader views (6)
Tax upon tax upon tax upon tax. Wake up people, look who is in charge and DO NOT vote for them again, its that simple, lets send the message.
- Brandon Thomas, SW7, 01/10/2009 14:20
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Charles is right and James wrong. We have the same problem in Brighton. If Brighton + Hove council could keep all its business rates, there would be no need for a local council tax at all. Instead, all business rates are sent directly to central government, which parcels it out, so poorer areas get a lot and rich areas get not a lot. Whether any local council cut its budget would not make a whit of difference to its allocation of funds from business rates.
- Rupert Rg, Brighton, East Sussex, 01/10/2009 13:49
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If the firms have to lay off staff to pay higher taxes, that'll mean less people commuting in to work so there'll be less stress on public services and more money to spend on them. A win all round!
- Threaded, Roskilde, Denmark
Nice of you to think of the staff that will be laid off -- dooh
- Grim Reaper, Hell, 01/10/2009 13:33
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James, you're very much mistaken. Westminster Council does not set business rates, these are set by central Government and apply nationally. Local councils just collect the rates on behalf of central Government. If you read the story above you will see it makes clear Westminster is concerned about how the rise in business rates will impact businesses in its area, which is why it is calling for a radical overhaul of the whole system.
- Charles Begley, Westminster, 01/10/2009 11:40
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If the firms have to lay off staff to pay higher taxes, that'll mean less people commuting in to work so there'll be less stress on public services and more money to spend on them. A win all round!
- Threaded, Roskilde, Denmark, 01/10/2009 09:29
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Greedy Westminster fails to cut its own budget, fails to cut unnecessary projects and inappropriate social project and in the midst of the worst recession for decades, with mass unemployment and spending being cut what is the best idea they can think of to keep their index-linked final salary pensions going
They decide to double the tax on the few business left in the borough - how many stores will need to close before the message goes home to people - we need work not more homes, we will not tolerate bloated and unnecessary council spending and we will not tolerate financial penalties that restrict England’s ability to build business to get out of recession 
Wake up Westminster before a lynching party throws you out of office along with your salaried staff !
- James, City of London, 01/10/2009 09:27
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