Fed up with business rates? A “radical” review is coming

But will it bring change fast enough?

If there’s one complaint about business regulation that we hear again and again from the business owners we talk to, it’s that UK business rates are extortionate.

There is plenty of anecdotal evidence that our high business rates risk the growth of businesses.

They also threaten the UK’s attractiveness to retailers and other companies looking to expand, compared with our European counterparts.

Take Garry Hogarth, CEO of Agent Provocateur. He wrote for us in Securing Britain’s Growth in June that not one of the 24 new projects the fast-growing lingerie brand was planning in Europe for the year ahead would be in the UK because of the cost of rates on top of expensive premises rental prices.

“We pay on average 40% of our shops’ rent in business rates. It’s a huge amount of money and I can’t see what benefit retailers are getting.” Hogarth said rates were a “major problem” for the British retail industry.

Unsurprisingly, the British Retail Consortium has been campaigning against business rates for some time, as this detailed manifesto laying out the case for reform shows.

Of course, it isn’t just retailers affected by business rates – some 1.8 million business properties are charged each year.

The tax raised some £20.5bn in 2013/14.

A “radical” review

So should we be glad to hear that the Treasury is launching a “radical” review of rates, that “paves the way for changes”?

The review is set to be launched in time for Wednesday’s Budget and will take a year. It was first announced in the Autumn Statement, according to the BBC.

But will it go far enough, fast enough?

Well, obviously the current system needs an update. It’s been in place for almost three decades, and we all know businesses are fed up with it.

Chief Secretary to the Treasury Danny Alexander said he wants to ensure rates become “fair, efficient and effective”.

But reports are suggesting that a new system is unlikely to change the amount the government receives from business rates via the tax.

At the moment, business rates are charged according to the size of a business’ premises and the type of business it is (broadly speaking), so there might be some change there to account for turnover (beyond the Small Business Rate Relief) in the review, though we’ll have to wait until next year to find out, of course.

Alexander explained as he announced the review: “Our system of business rates was created nearly 30 years ago.

“Since that time, the worlds of commerce and industry have changed beyond recognition. I’ve been impressed by the representations made by the business community and I know that business rates are a considerable cost.

“This government has taken measures to help businesses by capping rates and introducing reliefs for smaller businesses.

“But now the time has come for a radical review of this important tax. We want to ensure the business rates system is fair, efficient and effective.”