Saturday, 26 May 2012
The Colour of Money
Ministers bang on about small businesses and how they employ over 50% of the UK's workforce. Today's industrial and commercial giants were once small businesses so it's only right and proper that you, the tax payer, should put your hand in your pocket and give new small businesses all the help they need to be successful. Well, the banks won't.
That's why if you're a small business occupying less that a certain square footage you will be exempt from paying business rates, for this year at least.Good news all round you'd think, especially in these straigthened times when money's tight and many a small business is on the edge.
Except....take us for example. We're a small business, my wife occupies a workshop in a business centre, a converted mews building split into a range of small units; ideal for the "start up" run by one or two people. In the past we paid our rent to the landlord which included business rates and services. The business centre was rated as one unit, he was billed by the Council and he passed on to us our contribution (plus a percentage). All very straight forward.
Except...policy makers just don't think through their wizzy ideas. Our landlord, or his advisers, are not without a few grey cells. They realised that each unit in the business centre could be treated as a separate business and instead of the landlord paying the business rate, each business would be responsible for paying its own business rates. Each unit's square footage was below the threshold set by Government and so was eligible to full exemption from business rates this year.
This is how the landlord sold it to us. We would be responsible for the business rates from now on and we'd receive a notice of valuation from the Valuation Office, but since we'd be exempt this year, there would be no change in our out-goings. We'd continue to pay the same as we'd always had.
You've got to admire his business acumen. By the simple expedience of splitting his business centre into individual business unit - he rids himself of paying out loads of money and makes a massive windfall profit. We continue to pay the same rent - which now does not include any element for business rates. By rights our rent should decrease by the amount of the business rate element we, sorry, you the tax payer are paying. It hasn't.
I've worked out that he will have made around £42,000 this year by this legitimate tactic. Now that is what I call entrepreneurial spirit.
Across the country this tactic must add up to a few millions. So a policy that was designed to help small businesses is doing nothing of the sort.