Small businesses could be paying too much on rates

Many small businesses – including insurance brokers – could be paying too much in business rates as a result of being unaware of a government initiative offering reductions on such charges. Registering for the Small Business Rate Relief Scheme enables small companies to dramatically reduce the amount they pay in rates – for example, businesses that have a property with a “rateable value” of up to £5,000 are able to slash the amount they pay by 50 per cent. The problem is that this rate relief is not automatically applied to rate bills that are issued by councils – the onus is on the businesses themselves to apply for the scheme.

Indeed, it seems that a considerable number of small businesses have failed to apply for the SBRRS, and, consequently, could be making payments that twice as much as necessary. To give some indication of the amount of money this oversight is costing small businesses, a recent survey carried out by the Federation of Small Businesses in Essex showed that £48m of rate relief goes unclaimed each year in that county alone.

In an effort to ensure that more businesses benefit from the SBRRS, the FSB wrote to Prime Minister Gordon Brown last week urging him to take action. The FSB letter argued that the “very helpful” SBRRS was being undermined by the fact that relief is “not given automatically” to businesses by local authorities. The FSB also makes the point that other measures put forward by the government – such as those helping senior citizens – are the subject of awareness-raising campaigns that aim to ensure maximum take-up. Raising the profile of the SBRRS requires a similar level of urgency, according to the FSB.

That said, the FSB states that the most cost effective way of ensuring take-up of the SBRRS is by automatically applying the relief. John Wright, national chairman of the FSB, says such a measure would boost the economy and help businesses “get back on track”. He adds: “Business rate relief is money which small businesses are entitled to claim and presumably provision is made within the Government’s financial calculations for such claims to be made so this could provide a significant boost for small businesses without affecting the Government’s budget calculations.”