Chancellor Philip Hammond is considering a £1.4bn tax break for the smallest high street businesses in his budget on Monday.
The move would be a welcome change for many of the smallest high street businesses that have seen their operating costs spike in the last few years.
The Treasury is reportedly thinking about increasing the £12,000 rateable value threshold, where firms start paying business rates.
Currently, firms with properties that have a rent value between £12,000 and £15,000 pay a tapered rate between one and 99 per cent in England.
The Sun reports that the Chancellor is considering boosting the base rate up to £20,000.
If true, this would take more than 230,000 extra businesses out of the rateable zone and help the majority of small and medium sized shops, that have an average rateable value of £19,520.
The Sun also says that the Treasury is also looking at a more modest threshold increase, that would see the rateable value threshold rise to £15,000.
Many businesses are feeling the squeeze of high business rates. A major shake up to the business rate system in April of this year saw some firms paying significantly more.
Some larger chains have also complained about the rising costs, with many some major high street chains filing for administration or closing down stores as part of a CVA deal.
The idea of cutting business rates was floated by Business Secretary Greg Clark at the Conservative party conference last month.
He told a fringe event that high street businesses play an important role in the community in villages, towns and cities and that a change to the business rates system would help recognise that.
The Federation of Small Businesses Chairman Mike Cherry called on the Chancellor to go further and double the rate threshold to £24,000.
“A £12,000 threshold does not work in areas like Newcastle, Manchester and Birmingham where average rateable values are £34,000, £26,000 and £24,000 respectively,” Cherry told the Sun.
“This Budget is the Chancellor’s opportunity to turn kind words about supporting small businesses into action. If he’s serious about supporting firms on our high streets, he needs to reform business rates. Any new revenues from a digital services tax must be directed to this cause.”
Many shopkeepers would like to see the Chancellor go further. They argue that business rates were invented in a time before the internet and the property-based tax unfairly penalises bricks and mortar businesses.
Under the current system, they argue, eCommerce giants can prosper. Their out of town fulfilment centres are significantly cheaper than high street shops.
Amazon, which made £9bn in sales last year, pays just £38 million in business rates according to Altus Group.
This is just £2m more than struggling department store House of Fraser, despite the internet giant making more than 11 times House of Fraser’s annual income.
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