Rate Relief Won't Ease The Burden For Many

4.22.00pm BST (GMT +0100) Wed 21st Jul 2004

Commenting on today's announcement by Local Government Minister, Nick Raynsford, regarding an extension of the Government's proposed business rate relief scheme, Brian Cotter MP, Liberal Democrat Small Business Spokesman, said: "The Government still don't recognise the burden business rates place on small firms who proportionally can pay over five times as much as the very largest businesses.

"Although the Government is now offering to extend the rate relief, the proposal is a modest £2,000 extra on the qualifying threshold, bringing the upper limit to £10,000. A large number of small businesses will still lose out.

"In contrast, 84% of all businesses would benefit from an annual rates reduction of £684 under Liberal Democrat proposals for a 'business rate allowance.' This would work just like a personal tax allowance and would encompass the majority of small businesses by applying to all those with a rateable value of less than £25,000.

"This would amount to a total saving of some £951 million for the 1.39

million eligible small businesses in England, with the cost of relief met by

larger businesses and not the taxpayer.

"It is imperative that Government levels the playing field between small businesses and their larger counterparts, so that they are not commercially disadvantaged by the disproportionate burden of taxation."

Notes to Editors

• The ODPM announced today that it is extending its proposed rates relief scheme for small firms so that businesses with a rateable value of up to £10,000 would benefit from the scheme. The original proposed threshold was £8,000. (http://www.odpm.gov.uk/pns/DisplayPN.cgi?pn_id=2004_0174)

• The Liberal Democrats' proposal for a business rate allowance is more generous than the Government's scheme and conforms with the Forum of Private Business' request that rate relief should be given to businesses with a rateable value of up to £25,000.

Our proposal is for an allowance, exactly similar to a personal tax allowance, whereby a certain amount of a business' rateable value would be discounted in calculating its final bill. The allowance would only be available to the 1.39 million businesses in England with a total rateable value below £25,000. The shortfall in revenue would be made up by a corresponding rise in rates liability for businesses with a total rateable value above the allowance threshold, a rise which would be implemented on a sliding scale. In order to stop businesses with large numbers of small premises (ie WHSmith) from benefiting, eligibility would be calculated from total property portfolios, not from individual premises.

The Business Rate Allowance of £1,500 will apply to all businesses with a rateable value of under £25,000. With the National Rate Multiplier (the national rate payable per £ of rateable value) currently at 45.6 pence in the pound, this would lead to a reduction of approximately £684 in the total rates bill for 84% of businesses in England. (£1500 x 0.456 = £684) This would amount to a total saving of £951 million for 1.39 million small businesses in England.

The £951 million shortfall would be made up by the 256,788 large businesses with a rateable value of more than £25,000, in accordance with an upward scale, so that the very largest companies would pay more. This would redress the balance so that the very largest companies were paying a similar proportion of their turnover in rates as the smallest businesses.