Small retailers are seeing savings on their business rates dwindling substantially after being approached by rate reduction firms. Sara Beaumont lifts the lid on these intermediaries.
Rate reduction firms, which have been operating for years, have scented a fresh opportunity following the announcement of a new 33 per cent business rate reduction for small retailers.
Retail businesses with a rateable value of £51,000 or less will benefit from the generous reduction in their business rates, due to run for two years from April 2019.
The much-needed windfall was announced by Chancellor Philip Hammond in his Autumn Budget last year. He is introducing the scheme because the government recognises that small retailers are struggling to cope with high fixed costs, including business rates.
How rate reduction firms work
Rate reduction firms work by overseeing the relief procedure, but then take a large proportion of the savings for themselves.
Making a routine application for business rates relief to your local council is very straightforward and can easily be done without these intermediaries. Indeed, the small retailer relief is expected to be applied automatically.
Some firms of this type operate by pressuring small business owners to sign contracts or agreeing on the phone to conditions that involve handing over a percentage-based fee for any reductions in their business rates – even if the reductions are automatically applied by the local authority.
Contract issues
Some contracts demand 45 per cent of any reduction in rates, sometimes over a five-year period, with the agreements stipulating that this fee is payable whether or not the rate reduction firm is shown to be the effective cause of any such reduction.
Announcing the small retail scheme, the chancellor said it will represent an average annual saving of £8,000 for 90 per cent of independent businesses. This means signing up to a contract of this style will cost small retailers thousands of pounds a year.
Need to know info for small retailers
Retail relief should be applied automatically by the local authority, and retailers should beware of any offer to reduce their rates, unless this involves appealing against the rateable value of the premises.
The relief is due to run until April 2021, although many people believe this will be extended because the government is unlikely to impose a 33 per cent business rate rise so close to the next scheduled general election in May 2022.
Businesses can find and check their business rates valuation for free online here.
Seeing off the agencies in court
WHN has represented a number of clients who have been induced to enter into contracts with a rates reduction agency and who have then been sued for large annual fees. In every case which has proceeded to a final court hearing, we have been successful in defending the claims with the court finding that the contracts were mis-sold.
If you believe you have also been a victim of a rate reduction firm, call Sara Beaumont on 0161 761 4611 or email her at sara.beaumont@whnsolicitors.co.uk
