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Property boom lands firms with £1.9bn rates bombshell
Nicholas Cecil, Deputy Political Editor23 Nov 2009
London firms are to be hit with a £1.9billion increase in business rates over five years, it emerged today.
Companies in the capital face rises running into thousands of pounds after property prices soared in the run-up to the recession. Politicians today urged the Government to do more to help, warning that firms in the capital will be forced to pay more tax at a time when many are struggling.
The capital's businesses will be hit hardest because the levy - based on the rateable value or estimated annual rental value of the premises - is calculated using the high property prices in April last year.
Westminster has seen the biggest rise in the country, with its average rateable value up £47,000 last year compared with five years earlier. That is almost eight times the national increase of £6,000.
The second highest was Camden (£24,000) followed by Kensington & Chelsea (£22,000) and the City (£18,000). Hillingdon, Hammersmith & Fulham, Southwark and Islington also saw big increases.
London had been due to face an annual rise of £565 million for the next five years. But given the high increase, ministers have now agreed a £935million temporary subsidy for the capital's 270,000 or so businesses.
But this will still mean that these firms will pay an extra £1.89 billion in business rates over the five-year period.
Shadow London minister Justine Greening said: "London businesses will face significant business rates tax rises at the very time they can least afford it. The Government should be helping firms not kicking them while they are down and struggling to get back on their feet."
The tax is based on property valuations as at 1 April last year, since when commercial rents in London have fallen by up to 40 per cent.
The Department for Communities said that London is the region that benefits most from the subsidy.
Local government minister Barbara Follett said: "Revaluation makes sure each business pays its fair contribution and no more - it will not raise a single extra penny for government.
"Most business properties in outer London boroughs will see reduced bills next year."
Officials said that more than 55per cent of business properties in outer London boroughs would see rates bills fall next year by an average of £950.
They added that overall, across the capital, nearly 45 per cent of business properties would see rate bills drop next year. But many bills would rise in subsequent years as the temporary subsidy is phased out.
Reader views (5)
Can anyone tell me why a business that is creating jobs and adding value gets stuck with a bill with no theoretical upper limit, while a multimillion pound mansion pays a maximum of around £3k or whatever the top council tax band is? Sitting in a house doing nothing is better than working apparently
- Mombers, London, 24/11/2009 09:33
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Our new rateable value is up 44% out here in the sticks - so it's not just the city.
- Tony Marshall, Waterlooville Hampshire, 24/11/2009 07:25
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Yet more evidence that challenges the government's (and the opposition's) ridiculous belief that property price inflation is a desirable variant of inflation.
- Paul, London, UK, 24/11/2009 00:34
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Virtually every decision that has been made since the crisis began (it began in 2001, when lending started expanding out of control) has been totally wrong. Bailing out banks to save small businesses was real Alice in Wonderland logic, and now the consequences of this are being felt by small businesses. Businesses who did not participate in the boom are paying for their landlords' unearned gains through increased rates, whilst the money goes to fill the black hole of the banks bailouts (maybe not directly, but indirectly). Rates have to be paid with real money. Even if the banks start lending to businesses, this isn't good enough. It would be far better if they didn't have to borrow in the first place, but that's not how Brown's economy works. Tax the productive, bail out the unproductive to lend to the productive so that the productive can pay their inflated tax bills. New Labour Escher economics.
- Resigned, Of Chancery Lane, London, 23/11/2009 23:23
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In Windsor we are having to stomach an increase of 40.8% for my shop. It is unbelievable that central government can impose this during the current climate. I have no idea where the rates bill have fallen because everyone I know is facing huge increases.
- Dannyp, Egham, 23/11/2009 13:26
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