The business rates burden for retailers large and small, online and physical, needs to be reduced. As part of the Government’s goal to maintain a competitive tax environment for business, further measures to reform business rates are needed to fix an unsustainable system that continues to discourage investment in jobs and growth.
Despite last year’s review, retailers will pay an additional £2 billion over the next three years compared to the last three years. Business rates are deterring investment in local communities, causing shop closures and job losses in hard-pressed communities and preventing retailers from delivering what their customers want in an efficient and cost-effective way.
In England, the retail industry contributes approximately £7 billion of rates annually – nearly one-quarter of all receipts – far more than any other industry. Internationally, the UK pays among the highest tax on property as a proportion of GDP. A fairer level of property taxation, which is internationally competitive, will encourage growth and ensure continued business tax revenue.
The BRC recommends the following:
Renew business tax road map
In the road map published before the EU referendum, the Government committed to reform some aspects of business rates, which we welcome. However, further action is needed for businesses to effectively plan and invest. An important component of an updated road map should be a timetable to gradually reduce the disproportionate burden of business rates and fundamentally reform the tax.
CPI indexation beginning April 2017, flat rate beginning 2020
CPI indexation, which is more closely in line with economic circumstances facing retailers, is needed before 2020 to prevent loss of investment. In 2020, there should then be a flat rate linked to Rateable Value that already accounts for inflation and other economic conditions. Rates would then rise and fall in relation to property values based on more frequent revaluations.
Implement fair and predictable transitional arrangements
As the latest revaluation was delayed by two years, properties eligible for a lower rates bill should receive an immediate reduction and those expecting rates increases should be protected at the same level as the last revaluation in 2010. Businesses currently face an increase of 42 per cent with only a few months’ notice to account for in their budgets compared to a capped increase of 12.5 per cent in 2010.
Fair appeals system
Given the high burden it is essential that each ratepayer pays no more than their fair share. However, the new Government plans would allow the Valuation Tribunal for England to only order a change in valuation if it is ‘outside the bounds of reasonable professional judgement’. Instead, a collaborative working relationship between the VOA and ratepayers, where information and evidence can be shared and appeals avoided, should be sought.
More frequent revaluations
Three-yearly revaluations will reduce the number of unneeded appeals and be fairer and more closely aligned to economic circumstances. Rather than waiting another five years following the 2017 revaluation to assess properties, the industry is committed to working with Government to enable more frequent revaluations every three years, which should commence from 2020.