The Government has published a Treasury Select Committee Report which identifies key flaws in the UK’s business rates system.
It found that: since they were introduced in their current form in 1990, the revenue business rates have generated has outpaced inflation; that they do not impact businesses equally, placing a disproportionate burden on physical businesses over online enterprises; and that although they are an important source of Government revenue, they have significant negative impacts, and simply tweaking the current system is unlikely to be enough.
The Select Committee recommends that the Government takes a deeper look at possible alternatives and prepares a consultation in time for the 2020 Spring Statement. In the meantime, it suggests that improvements could be made, including improving reliefs, reducing statutory limits for responding to appeals, and ensuring that the Valuation Office Agency (VOA) is properly resourced.
Helen Dickinson OBE, chief executive of the British Retail Consortium (BRC), says: “We strongly welcome this excellent report. The Treasury Select Committee has identified key flaws in our broken business rates system. The BRC has long been calling for many of the key recommendations. Indeed, fixing transitional relief, introducing an improvement relief to unlock investment, and better resourcing the VOA, were all the focus of a letter to the Chancellor signed by over 50 retailers in August. Any party that wants to support local high streets should commit to implementing the committee’s reforms as a first step.
“Business rates are a significant driver of store closures and job losses, and retailers have been getting a raw deal for too long. While retail accounts for 5% of the economy, it pays 25% of the business rates. Such imbalances can be seen in transitional relief – identified by the committee as needing reform – which takes £1.3b from retailers and redistributes most of it to other industries.
“The General Election offers a unique opportunity to address some of the imbalances that have contributed to tens of thousands of job losses for the industry. We urge political parties to support local shops, local shopworkers and local communities by including these recommendations in their manifestos.
“While the committee is right to recommend that Government reviews alternatives to the broken business rates system, it must not do this in isolation. Any review must look at the whole suite of business taxation with the aim of creating a tax system that is fit for the 21st century.”