London 'needs separate business rates system to stop it being a cash cow'

London properties should be uncoupled from the national business rates system to prevent companies in the capital being treated as a cash cow, say the capital’s businesses.

Businesses in London could be forced to stump up an extra £4bn over the next five years under an upcoming revaluation, which has led the London Chamber of Commerce and Industry to call for the capital to have a separate business rates system or risk a “profound” impact on the capital’s economy.

The extra rates burden could force small, independent shops, bars and restaurants, which are already reeling from rocketing rents, to close down or move to cheaper locations, the LCCI has warned. 

Property values in London have soared since the last revaluation in 2008, meaning that many business will be hit with rocketing bills under the new regime.

St Pancras Station will be hit with the biggest rates rise

Business rates are often the third largest outgoing for companies after salaries and rents.

In total, the extra burden for London could be as much as £885m a yearbecause of an upcoming revaluation, due in April, as companies across the city face an average rise of 11pc. 

Few other places have seen values rise so significantly, with the result that businesses in the capital will pay disproportionately more than elsewhere in the UK. St Pancras Station will face the biggest jump in rates, paying £10.1m a year, an increase of £21.5m, or 73pc, over the next five years, exclusive analysis for The Telegraph by CVS, the business rates specialist, has found.  

The Royal London Hospital in Whitechapel also faces a £13.5m jump in its rates bill over the next five years while the demand on the BBC for Broadcasting House in Portland Place will rise by £19.5m.

Harrods, Selfridges and John Lewis will also face steep rises, CVS calculated. Some West End retailers and office occupiers in Shoreditch will see bills more than double as a result of the delayed revaluation, which was held back for two years to prevent the changes from taking effect just before the last general election. 

Harrods department store will also face a rocketing rates bill

The Chancellor of the Exchequer, Philip Hammond, has proposed a relief scheme that would limit increases for business to 42pc in a year. This has been considered as woefully inadequate by critics who have highlighted that in the last business rates revaluation, rises were capped at 12.5pc. 

Colin Stanbridge, chief executive of the LCC, said: “The Government should consider proposals for London to be ‘uncoupled’ from the national valuation system that gives London’s businesses an unfair deal.

“We are not asking for special treatment for London nor do we seek to implement changes that will see the rest of the country lose out, but at the same time we do not want to risk businesses shutting up shop or moving out of London altogether. 

“We need to be wary of potential pitfalls including business being viewed as a ‘cash cow’,” Mr Stanbridge said.

Chancellor Philip Hammond has been criticised for not overhauling the outdated business rates system

The LCCI says there is a case for “substantive” changes to the rates system, including breaking the link between revaluations and the fixed tax yield it generates. Doing so would prevent what the chamber described as “punitive rises” in the future. 

According to the LCCI, the new rates will hit small- and medium-sized businesses particularly hard, as they are less able to find the resources to pay the higher bills.

There has also been criticism of the Government’s plans to reform the business rates appeals process, which will mean that companies  have to pay their rates bills for an entire year, even if the bill is incorrect.