THE MOST wide-ranging review of national business rates in a generation has been launched by the government, paving the way for changes to how businesses across England pay tax.
The review, set to report back before the 2016 Budget, will look at how businesses use property, what the UK can learn from other countries about local business taxes, and how the system can be modernised to better reflect changes in the value of property.
Danny Alexander, chief secretary to the Treasury, said the current system was in need of a “radical review” because the world of business had “changed beyond recognition” since it was created nearly three decades ago.
“We want to ensure the business rates system is fair, efficient and effective,” Alexander said.
The current system, where rates are charged based on the value of commercial property, is disliked by many small businesses on the High Street and some large retailers who feel they are at an unfair disadvantage against online rivals.
John Cridland, director-general of the CBI, said the current system is “outmoded, clunky and regressive and holding back the high street”, adding that the review provides an opportunity to go much further than the package of measures already announced in last year’s Autumn Statement.
“We’ll be making the case for removing the smallest firms from paying business rates completely, linking rates to CPI rather than RPI and introducing more frequent valuations,” Cridland said.
The announcement follows the government’s commitment in December 2014 to conduct a review of business rates and implement a £1bn package to reduce the cost of business rates in 2015/16, with particular support for the smallest businesses and the high street.
Chancellor George Osborne last year promised to cap the rise in business rates at 2%, while also extending the small business rate relief to 2014 and offering small retailers a £1,000 discount on business rates for the next two years. He also announced plans for the introduction of a “re-occupation relief” that will halve the rates for businesses moving into vacant premises and that businesses will also be allowed to pay their rates in 12 monthly instalments.
John Longworth, director general of the British Chambers of Commerce, said the review of business rates needs to deliver “root and branch” reform of the system.
“The government is asking a lot of important questions in this review – for business however, actions speak louder than words,” he said. “Unless a root and branch reform of business rates is delivered at Budget 2016, business will regard this as a missed opportunity to tackle a huge brake on investment and growth.”
The review comes amid further signs the High Street continues to suffer from increasing online competition and changing consumer habits with a three-fold rise in the number of store closures last year. According to PwC research compiled by the Local Data Company, 5,839 shops closed in 2014 compared to 4,852 openings, which equates to a net reduction of 987 shops.
Shabana Mahmood, Labour’s shadow exchequer secretary to the Treasury, said Britain’s businesses need more than just a re-announced review.
“Labour will take immediate action by cutting and then freezing business rates for 1.5 million small business properties,” she said.