Why skating over business rates in Budget 2021 will be a mistake

The Government must not just skate over business rates when it finally responds to the consultation on business rates reform in the Autumn Statement on Wednesday.

According to John Webber Head of Business Rates at Colliers, after four delays in the last year, for the government to  just “tinker around the edges” as press reports have indicated, “will be an affront to business and will cost livelihoods and jobs.”

The system which provides £32 billion gross (£26 billion net) for local authority funding is under fire, and needs a proper reform, particularly because the current system is unfairly skewered against the retail sector who pay nearly one third of the tax. Due to the gap between revaluations many retailers and hospitality businesses are paying rates bills linked to rental values in 2015- despite very different current market conditions. Unaffordable business rates bills have been cited as one of the key reasons for the decline in our high streets in recent years as more and more retailers either go bust or cut store number and jobs.

“All the experts in the industry agree the system in current form is unworkable,” says John Webber, Head of Business Rates at Colliers “And we have been clear on the areas that should be reformed:

• There is almost unanimous agreement that overall rates bills need to be lower- at Colliers, we believe the multiplier (UBR used to calculate rates bills) should be cut to 30p, which is more manageable for businesses than the current 51p in the £ tax.

“The current multiplier is now so high that it directly impacts on the decisions made by companies as whether they open, close or downsize their bricks and mortar estate. A tax that therefore in turn affects employment and jobs must change.”

• The burden of taxation should be shifted away from the physical retail sector.
• The myriad of rates reliefs should be reformed and reviewed at every revaluation cycle to prevent “business rates deserts” in some parts of the country
• The six months empty rates relief, received by the industrial and warehouse sectors, should be extended to the retail and offices sector
• Plant and machinery orders should be reformed with those parts that are an integral part of the trade process exempted from business rates, encouraging investment. Reform should also support a greener agenda- encouraging investment into new forms of heating/ environmentally friendly systems by making these rates exempt.
• We need more frequent revaluations, so rates better reflect property values. The government is proposing three yearly revaluations- we would like to see these annually.
• We need an overhaul of CCA, the disastrous appeal system, where waiting times to have appeals heard is getting longer and longer.
• The VOA should be properly resourced to deal with more frequent valuations -so the burden of administration is not further placed on businesses
• The Government needs to take a proper look at Local Authority financing – any shake up to the business rates system must “recognise the importance of this income stream to fund local key services” (Local Government Association).