Retail is transforming. Historically, there has been a clear link between the success of a retailer and its physical shop where all transactions took place. However, due to changing technology and consumer behaviour, accelerated by Covid-19, retail and the wider economy operate very differently now. It is critical that the business taxation system, particularly business rates, is updated for the 21st Century.
Retail contributes £8 billion in business rates annually; a quarter of the total. The central problem with the rates system is that the national multiplier (the tax rate) has grown out of proportion since its introduction in 1990, irrespective of the strength of the economy or success of businesses. An over-dependence on input taxes harms retailers, which are people and property intensive businesses, and such taxes have grown disproportionately compared to other taxes such as corporation tax. For every £1 retailers pay in the latter, they pay £2.30 in business rates.
Following BRC lobbying, the Government is reviewing business rates. Reform must adhere to the following principles:
- A tax burden that is sustainable (at least 20% lower than the current level) and floats as any other tax
- Valuations of property that more closely reflect current values – meaning more frequent revaluations and an end to downwards phasing of transitional relief
- A system that works for users – the Valuation Office Agency needs investment to get valuations right first time and to process appeals more quickly
If you would like to join the debate over reform, please contact Dominic Curran.