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FIRMS HIT BY TAX HIKE ON OFFICE SPACE

CITY firms are bracing themselves for a crippling increase in business rates after new valuations for their premises were released yesterday.<br /><br />The tax hikes led to fury after it emerged that the majority of businesses will see increases of between 25 and 40 per cent.<br /><br />From April next year, the new business rates will be based on rental values calculated between April 2003 and April 2008.<br /><br />During this five-year period, rents in the City and the West End were booming, meaning that firms will now have to pay inflated business rates on property which has since slumped in value.<br /><br />Industry observers have argued that the government&rsquo;s decision to base the rates on rental values from before the slump will leave businesses struggling.<br /><br />London Councils&rsquo; chairman councillor Merrick Cockell said: &ldquo;Forcing London&rsquo;s businesses to pay rates based on pre-recession values is short-sighted.<br /><br />&ldquo;The capital has already borne the brunt of the recession and introducing inflated rates at this time will really hamper their recovery.&rdquo;<br /><br />Estate agent Cluttons said: &ldquo;The business rates burden for some office occupiers is set to rise by up to 160 per cent in 2010.&rdquo;<br /><br />Liz Peace, chief executive of the British Property Federation, added: &ldquo;With this revaluation taking effect in such challenging economic times, government must be open about the impact for individual businesses.<br /><br />She added: &ldquo;And it should support both those who would see big increases in rates bills and those whose property values have performed badly.&rdquo;<br /><br />The retail sector will be hit the hardest by the changes with prime sites on Oxford Street facing rises of &pound;112,000 on top of current annual bills of &pound;499,550. By 2015, the total bill for these retailers will be over &pound;820,000 a year.<br /><br />Tom Ironside, director of the British Retail Consortium said: &ldquo;Property is one of retailers&rsquo; biggest costs. They are left paying a quarter of all business rates despite making up eight per cent of GDP&rdquo;.<br /><br />During the downturn struggling retailers have already had to ask landlords to accept monthly rental payments instead of quarterly ones.<br /><br />Ironside added: &ldquo;Retailers need to be cushioned from the worst effects of revaluation on their business rates bills.&rdquo;<br /><br />Meanwhile, Mark Henderson, head of DTZ statutory valuations, said: &ldquo;For businesses struggling in the current market, this is going to be a particularly difficult burden to bear.&rdquo;<br /><br />Confusion among businesses was compounded yesterday, after a flurry of firms tried to access the government&rsquo;s website on business rates, causing it to crash.<br /><br />The Department for Communities and Local Government is proposing a &pound;2bn relief scheme to help struggling firms to cope with the rise in business rates.