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Evaluation of the Impact and Effectiveness of the Small Business Rates Relief Scheme

4 Results of the survey of companies receiving SBRR

Introduction

4.1 The company survey was undertaken in four local authority areas. It had originally been intended that one of the major cities would be included in the survey. However, as data was only received from less urban authorities, Paisley and Inverness were chosen as the two urban areas. The survey concentrated on those businesses receiving the higher rates of relief, as these companies were more likely to be aware of the savings they are making and the potential impact. The sample also aimed to cover service and manufacturing companies, although in some areas there were difficulties in identifying sufficient numbers of manufacturing companies from take up records. Table 4.1 shows the sample split.

Nature and Size of Businesses

4.2 The 30 companies surveyed included 23 service, 6 manufacturing and one business in the primary sector (a quarry). The businesses were spread over a range of industrial sectors.

4.3 The age of the businesses covered a broad spectrum though most were long established:

• 1 business had been a new start in 2003
• 4 businesses had set up between 2000 and 2002
• 25 had been established pre-2000 and 13 of these had been in business for more that 25 years.

4.4

Most (26) of the businesses occupied sole premises. Only four of the companies contacted were part of a branch operation. Most were very small, employing few people:

• 6 were sole traders;
• 16 had between 2 and 5 FTE workers; and
• 6 had more than 5 FTE workers.

4.5 19 companies gave an indication of the turnover of the company (see Table 4.2.) There were only 4 businesses that disclosed a turnover in excess of 1 million.

Company Costs

4.6 Few of the businesses surveyed were able to give details of either their total costs, or any breakdown of costs. This made it difficult to analyse how significant rates are as a percentage of costs or as a percentage of turnover.

• No company gave enough cost information to enable rates as a percentage of costs to be calculated.
• Only 10 companies could estimate their rates bill and only 3 were correct within 20%.
• Where it could be calculated (9 companies), rates accounted for 0.02% to 2.1% of turnover.

Knowledge of and Eligibility for SBRR

4.7 Knowledge of the SBRRS was low amongst the businesses surveyed. Only 16 of the businesses were aware of the scheme. Most of those had become aware through leaflets that came with the rates bill or government publicity (see Table 4.3).

4.8 Only 13 of the 30 businesses knew that they were receiving SBRR. Most of these were receiving the higher rates of SBRR and, as they had applied for this, it was unsurprising that they were aware of the scheme. Out of the 30 businesses surveyed, 27 appear eligible for SBRR although only 18 have applied for, and are receiving the higher rate of relief.

4.9 Some explanation of why many of the businesses are confused about whether or not they are receiving any SBRR or whether they are receiving the higher rate can be seen from some of the comments made (see Table 4.5). Where the 5% automatic relief has been applied many businesses do not seem to realise this. One company that thought they were not receiving SBRR, had applied for the higher rate of relief, but, as they had heard no more, wrongly assumed that they are not receiving any relief.

4.10 However, it is unclear why five businesses that appear to be receiving the higher rate of relief are unaware that they are doing so, especially given that higher relief requires submission of an application.

4.11 The amount saved through SBRR averaged around 190 for those receiving 5% and 536 for those receiving the higher rate, with the highest relief being 736. This is broadly in line with the evidence form the data reviewed in Section 3. All those businesses that have applied for the higher rate found the application process easy or very easy.

Impact of SBRR on companies

4.12 There were only 13 businesses clearly aware that they were receiving rates relief and therefore only these businesses could assess the potential impact of the scheme. Of these:

• 5 companies said there was no significant impact;
• 5 thought the main impact was on profit margins;
• 2 said the main impact was to enable them to increase capital investment;
• 1 said the SBRR increased their competitiveness; and
• 2 companies said there was a potential that they could close down if SBRR was withdrawn.

4.13 Rates was not seen as the most important issue affecting the businesses (see Table 4.6). Rates ranked second to personal taxes, although the two issues ranked highest when companies made both a first and second choice.

Conclusions

4.14 The main conclusions from the survey of 30 businesses are as follows.

• Few companies appeared to know their costs or the amount they paid in rates.
• Only 16 of the companies were aware of the SBRRS.
• Only 13 companies claimed that they were receiving SBRR, when 18 appear to have claimed the higher rate and the other 12 automatically get 5%.
• All those businesses that have applied for the higher rate found the application process easy or very easy.
• 8 of the 13 companies that knew they were receiving SBRR claimed this made a significant impact on the company - mainly on profit margins.
• Personal taxes were rated as more important than rates to the businesses surveyed.

4.15 It is difficult to draw definitive conclusions concerning the impact of the Scheme from the survey evidence. Nevertheless, while 8 of 13 companies claimed that the Scheme had a significant impact on the firm, in 8 cases this effect was simply to increase profits - which implies no definite change in activity or employment. It is intuitively difficult to accept that an increase in profit of, at most, 700 per annum can be critical to many businesses. The suggestion that some firms would close down on the basis of such an increase in costs is plausible only if these businesses were highly marginal.

4.16 For some ratepayers the support provided by the SBBR may be important - one can imagine this being the case in a small and marginal retail operation - but it is unlikely that the scale of support could be regarded as sufficient to affect the viability or growth of whole sectors or groups of firms.

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