Business Rates proving too heavy to bear? Scott Conway of Venture Banners puts out a rallying call for SMEs to join him in a revolt against expected rate rises in 2013.
I watched with equal amusement and horror recently as the French Prime Minister announced a new 75% tax rate in lieu of Government spending cuts. I imagined the French population nodding sagely at the news whilst dusting off their guillotines.
Taking 75% of someone’s hard earned income is absolutely abhorrent. In fact, let’s think about this on a more local level, taking 40% of someone’s salary is also outrageous. And in this country we are talking about taking 40% of an annual wage of £41,450 which is the 2013 threshold. Now I know that £41,450 is a reasonable whack but it certainly does not buy you into a world of Range Rovers and houses in the Cotswolds, which is the sort of income level you would expect to attract a 40% tax rate.
From this you will have deduced that I am not a fan of taxes. However that is simply not the case. When I am broken, I want the NHS to fix me. Now I could go into a rant about how the benefit system takes more tax payers money than the whole of the NHS or how Her Majesty’s Treasury managed to spend 109 billion last year just bailing out men with stripy shirts in big glass offices who’d lost all their money, but I won’t. I want to talk about what I like to call ‘business prevention taxes’. These are the taxes that are imposed on businesses that do nothing other than to stifle entrepreneurship.
The tax in my crosshairs is Business Rates, or Non-domestic Rates as it is also known. This is a tax on the rateable value of your company premises which represents the open market rental value at a set date, currently 1 April 2008, which strangely was the height of the boom.
The rate of this tax is set currently at 43.3% but it is due to go up this year. So, to put this into perspective; if the rateable value on your commercial property is £55,000 per annum you will pay an additional £23,815 per annum in business rates, even if you are only paying £25,000 per year in rent on the premises. In fact you will pay your 43.3% even if you own the building outright and it’s empty! This tax collects 19 billion for our Government each year on its own.
Now, at home I pay my council tax and for that my rubbish is collected, my street swept and I get the odd street light so I can find my way home from the pub. So what do we business owners get for our Business Rates? Absolutely nothing. And I do mean nothing; you will even have to pay an outside contractor to collect the company rubbish.
If you are a charity however you can apply for relief from business rates which would go some way to explaining why big name retailers are falling like dominos and the high streets are filling with charity shops.
I am in the un-enviable position of seeing a fair few balance sheets prepared by insolvency practitioners for companies that have gone to the wall and in every case, almost without exception, the biggest creditors by far are the local council and HMRC. That suggests to me that these companies were being taxed out of existence and in the true tradition of a self-fulfilling prophecy the employees of these companies are left without a job and become dependent on benefits. Instead of contributing to the system they become a drain on it.
Business Rates is a huge taxation on an outgoing that a lot of businesses already struggle with, their premises costs. How on earth do you tax an outgoing at 43%? Imagine having a 43% tax on your monthly mortgage payment or your phone bill for that matter.
I want to know at what point did this tax get introduced and why have we, the entrepreneurs and business owners, not rebelled? I know for a fact that the business rates on our premises are the sole reason we have not employed an additional two production people. And with our policy of employing long term unemployed in our production, that would be two more people off of the dole and into work, where they would pay tax. How many other companies, I wonder, are in the same boat?
I propose we start an SME owner’s revolution. They can’t ignore all of us if we all stick together. For added impetus we could borrow some guillotines from the French when they’ve finished with them.