The Federation of Small Businesses (FSB) has penned an open letter to the UK government, urging them to consider an aggressive overhaul of a business rates system the FSB deems to be “regressive and outdated”.


The FSB insisted to government ministers that small business owners should not be stung with more expensive business rates bills for improving the eco efficiency of their premises or by improving staff wellness and productivity with new in-house amenities.


Its national chair, Mike Cherry, opted to publish his open letter just weeks before the government publishes its fundamental review of the business rates system. The review was due to be published in February but was delayed due to the ongoing Covid-19 crisis, with the autumn expected to provide greater “economic clarity” on the state of play.


Mr Cherry described the current business rates system as a “levy that hurts small firms trying to do the right thing”. Cherry discussed several use cases where business rates penalise firms for bettering themselves and their premises. He said that firms which “put solar panels on the roof” or “install ventilation” for employee wellbeing will result in the Valuation Office Agency informing the local authorities that they “should be paying more in business rates”.


Cherry insists the current system “cannot be the right approach to taxation” in an age when the UK’s small business community is being encouraged to “transition to net zero” and focus heavily on employee safety and wellness in the post-pandemic period.


“The government is absolutely right to overhaul a business rates system which often lets online retailers operating from remote warehouses off the hook whilst punishing small businesses that serve as community hubs”, said Cherry.


“We should be aiming to take more small firms out of the system altogether.”


The FSB’s four-pronged approach to a fairer business rates system is as follows:


  1. Expand the threshold for 100% small business rates relief to £25,000 to accelerate the recovery of high street retailers.
  2. Provide business rate exemptions for England-based childcare providers, realigning with the approach taken by the Scottish government and Welsh assembly.
  3. Bring an end to penalising commercial property investment in sustainability e.g. insulation, solar panels, recycling facilities. In summary, any improvement that would historically increase property values and therefore raise business rates bills.
  4. Do away with the “quirk” in the business rates system whereby businesses operating over two premises are charged rates even if its overall valuation should qualify them for rates relief.


“Renewed efforts to ensure that rates bills are based on fair valuations are welcome and much needed – the more we can move to rolling up-to-date valuations, the more we can ensure this is a fair system fit for the digital age”, concluded Cherry.


As an owner-manager of 4,000,000 sq. ft of prime grade commercial space to let across the UK, rest assured that Pall Mall Estates endeavours to invest in the sustainability and amenities of all our office and industrial units, futureproofing environmental standards and driving the productivity of our valued tenants.


If your business is looking for its next ‘home’, pick up the phone and talk to our friendly and experienced team today on 020 8108 7078 or outline your bespoke requirements using our online enquiry form.