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UK companies face business rate 'iceberg' next year

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British companies are headed for an ‘iceberg’ next spring, industry groups warn.

They said companies that profited from the upcoming revaluation could see their profits eroded as a result, and those that suffered losses would see their losses magnified.

The business tax rate, the tax paid by companies based on the rental value of real estate they occupy, increases at the start of each tax year based on the consumer price inflation rate in September of the previous year.

The annual ascent has been canceled for the past two years to help businesses weather the coronavirus pandemic. However, the Bank of England predicts that inflation could reach 11% by the end of the year and interest rates could rise significantly in 2023.

The CBI’s director of economic policy, Louise Hellem, called on the incoming Conservative government to ease the burden.

“Businesses are facing a bill hike of about 10% in April on inflation alone, unless urgent steps are taken to ease the burden of business interest rates,” she said. , is an iceberg that threatens companies already reeling from rising energy costs post-pandemic.”

Craig Beaumont, head of external affairs at the Small Business Federation, raised the issue with Prime Minister Nadim Zahawi at a meeting last week, asking for help with a “pre-profit tax.”

“SMEs could face the double whammy of inflation and revaluation next year, with some facing a massive 200% price hike,” he said.

Next year will see the revaluation of commercial real estate for the first time since 2017. With rents plummeting in many areas, many tenants are expecting significant price cuts.

By law, however, the reassessment must be substantially fiscally neutral to the Treasury, and without intervention, the overall tax burden for 2023 will be roughly the same as the 2022 figure for inflation. It means that it will be plus the rise.

Real estate adviser Altus Group says tax revenue from the business tax rate in England (where the tax is decentralized in Scotland and Wales) could rise by nearly £3bn in 2023, based on bank inflation projections. Said there was.

Altus UK president Robert Hayton said ministers “should end once and for all this ridiculous policy of expanding the tax base through inflation”.

The Treasury Department is under pressure to cut corporate tax rates, and the CBI has calculated that the UK’s property tax is four times higher than Germany’s and 50% above the G7 average as a percentage of GDP.

But last year’s review ruled out any fundamental changes. Instead, the government has debated whether to impose an online sales tax to help high street retailers. Separate talks on a transitional relief to smooth the impact of the volatility ended last week.

Mr Beaumont said ministers “should abolish downward transitional easing” and cap the business rate easing at £25,000 “to keep the smallest firms out of this regressive anti-growth tax”. asked to be lifted.

Currently, only companies occupying premises with an appraised value of less than £12,000 are exempt from the tax rate.

The Treasury Department said decisions on multipliers and interim bailouts will follow a standard budget process.