SMALL businesses in the south are being warned to be wary of approaches from companies offering to reduce their rates bills.

Some members of the Federation of Small Businesses (FSB) in Hampshire have already been caught out and parted with money.

Ken Moon, regional vice-chairman of the FSB, which is the mouthpiece of 5,700 members in Hampshire and the Isle of Wight, said: "Small businesses should not enter into contracts without first seeking advice. I hope we can prevent people from losing money."

Thousand of small businesses are facing significant increases in their businesses rates following this year's rates revaluation.

Rates are often the second or third highest outgoing small firms face, so it is not surprising that many firms decide to look for help.

However, small businesses should look out for what the FSB describes as "business rates cowboys".

These so-called advisers tell businesses that they can get them a reduction in their rates bills.

They charge a hefty fee, sometimes as much as £595, but do little more than send a standard form to the Valuation Office.

Mr Moon said: "This is something every small business can do for themselves and there is no guarantee of a rates reduction."

Small businesses should in the first instance contact the Valuation Office Agency via the phone number on the summary rates valuation received or their National Helpline 0845 602 1507.

Professional rating advice is also available from the Royal Institution of Chartered Surveyors at www.rics.org.uk, and the Institute of Revenues, Rating and Valuation at www.irrv.org.uk.

These bodies have signed up to a joint code of practice for rating advice, which can be viewed on their websites.

For a business with a turnover of £50,000, business rates represent 7.7 per cent of sales, but for those with a turnover of £500,000 it is 1.4 per cent.

The 2005 business rates revaluation looks set to compound the problem, with high increases in rateable values (from which the overall rates bill is derived) for retailers, and especially those in affluent areas.

According to the FSB, the widespread increases in rateable values will not only spell increased rates for many small businesses but will also drag many firms out of the threshold for Small Business Rates Relief - which can lead to a discount of up to half.

Ken said: "Business rates are often the second or third highest outgoing small firms face. Rates can be the difference between success and failure.

"The government must act now to right this disparity and support small businesses. It should extend small business rates relief to all business premises with a rateable value of less than £25,000."

CASE STUDY:

Chris Wiseman, 57, (pictured above) runs a gift shop, called The Next Level, in Twyford Road, Eastleigh.

He was facing a 76 per cent hike in the annual business rate, from £2,500 to £4,500, following a summary valuation by the Valuation Office.

Chris wasn't happy with that hefty figure - and got a provisional £1,000 knocked off after demanding a reassessment.

"I made a big fuss and, to their credit, they looked into it. I was pretty hot under the collar. If I had not made a noise, they would not have looked into it."