Business urges second look at council levy

Business urges second look at council levy

By Jim Pickard, Political Correspondent

Published: February 15 2008 02:00 | Last updated: February 15 2008 02:00

Business leaders have called on the government ahead of the Budget to rethink a tax that councils will be able to levy on businesses. The Institute of Directors and the British Chambers of Commerce say the supplementary business rate will be the latest in a series of burdens imposed on companies.

The government has seen a backlash to its plans for a new capital gains tax regime and a levy on "non-doms" - rich foreigners who do not pay personal tax - prompting a partial climbdown on both.

Miles Templeman, director-general of the Institute of Directors, said that the SBR would "rock" business because it would be imposed on companies regardless of their profitability.

The levy, to be introduced in 2010, would be used for specific infrastructure pro-jects upon which local business people would have a vote in some circumstances.

With councils facing a financial squeeze, however, there is a suspicion some local authorities might seek to use the new rate to help plug funding gaps. Up to £600m a year could be raised if all authorities implement the levy, according to an estimate from the Local Government Association.

Companies already pay business rates levied at about 44 per cent of the rateable value of a commercial property, usually akin to its annual rental value. The SBR would add a further 2 per cent to this.

Richard Bacon, head of tax at the IoD, said the group was "extremely concerned" because the levy would fall disproportionately on business rather than the public. Although it seemed small, it still amounted to a 5 per cent increase in business rates at a time of increasing economic uncertainty.

David Frost, director-general of the British Chambers of Commerce, said the levy was the latest example of taxes "piling up on business" and it should be introduced if only national tax levels were cut. "With the UK economy facing a downturn, conditions for enterprise worsening and a number of additional business levies already in the pipeline, we are very concerned about the impact the government's proposals on a supplementary business rate could have on business's ability to compete," he said.

The CBI employers' group is more open to the idea of the tax, which could work in a similar way to business improvement districts, which involve companies in the upkeep of their neighbourhoods.

Properties with a rateable value of less than £50,000 will be excluded from the levy, which will fall most heavily on London.

The IoD complained the government had failed to consult before its white paper on the levy, published in October. But the government said it had held discussions with a wide range of groups and the supplement could provide a "valuable new tool for local authorities to help them promote economic development".