The Government has launched a review into business rates that it is labelling the “most wide-ranging review in a generation”.
Chief Secretary to the Treasury Danny Alexander said at the launch of the review the new system would be “fair, efficient and effective” after admitting the industry had changed “beyond recognition” since business rates were created almost 30 years ago.
The review will look at how businesses use property, what the UK can learn from other countries about local business taxes and how the system can be modernised to better reflect changes in the value of property.
As part of the review, the Government has pledged to answer the following 15 questions:
-What, in your view, does this evidence suggest about the fairness and sustainability of business rates as a tax based on property values?
-What evidence is there in favour of the government considering a move away from a property based business tax towards alternative tax bases? What are the potential drawbacks of such a move?
-If business rates remain a property tax, how do you suggest business rates could take into account the individual circumstances of businesses such as their size or ability to pay rates?
-What evidence and data can you provide to inform the government’s assessment of the trends in use and occupation of non-domestic property?
-Is there evidence to suggest that changing patterns in property usage are affecting some sectors more than others?
-What examples from other jurisdictions and tax systems should the government consider as part of this review? What do you think are the main lessons for the business rates system in England?
-How can government use business rates to improve the incentive for local authorities to drive local growth?
-What impact will increased local retention of business rate revenue have on business growth? What will the impacts be on local authorities?
-What other local incentives should the government consider to further incentivise business growth?
-Should business rates be reformed to make them more closely reflective of wider economic conditions and if so, how?
-How does the proportion of total operating costs accounted for by business rates vary by the sector and size of a business?
-What is the impact of the business rates system on the competitiveness of UK businesses? Are there any particular impacts on SMEs?
-How could the government better target support for SMEs given that the size of a company may not be reflected in the rateable value of a property it uses?
-Should investment in plant and machinery, energy efficiency improvements or other similar property improvements be treated differently by the business rates system? If so what changes could be made?
-What evidence and analysis should the government take into account when evaluating the impact of and any changes to the range of reliefs and exemptions present in the business rates system?
Launching the review during a speech to local businesses in Cambridge, Alexander said: “The 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.”
The business rates review, which was first revealed towards the end of last year in the Autumn Statement, will report back by next year’s Budget statement.
It will examine the structure of the current system, which is paid annually on 1.8 million properties in England and will examine local business taxes used by other countries.
Retailers with a large bricks-and-mortar presence have often complained about the lack of business rates paid by online retailers.
Speaking immediately after the unveiling of the business rates review at December’s Autumn Statement, former Sainsbury’s boss Justin King argued it was perfectly possible to charge online retailers a fair business rate by examining delivery postcodes.
He said: “It has to be spread evenly across all retailers regardless if they have shops because the services business rates pay for are used by all companies. Everyone who delivers to people’s homes knows the address they deliver to so it is perfectly possible for people to measure what their sales are postcode by postcode.
“If you base business rates on sales rather than space then by definition it will be equitable. Let’s hope it’s a real review that leads to meaningful change.”
British Retail Consortium director general Helen Dickinson added: “We supported the government’s decision back in December to take a proper look at the inequities of this system and today’s announcement from the chief secretary of a ‘radical’ review is great news for all of us who want a fairer, more efficient and sustainable system.
“To guarantee that this review is a success it’s absolutely crucial that the government seeks authoritative and independent analysis as it progresses, with solutions based on the objective consideration of supporting evidence.
“Taking this approach will guarantee that the government’s own assessments are robust and that the necessary sweeping reforms deliver a fairer and sustainable system, one that ensures that the tax more closely reflects the wider economic conditions and allows businesses to remain competitive.
“With cross-party political support for a fundamental review of business rates I’m confident that we can bring about badly needed change, and in doing so securing the investment, jobs and growth that have been held back by the burden of this pernicious tax.”
The Government has already revealed a raft of tweaks to the business rates system, primarily aimed at small business.
From April 1 there will be an increase in the business rates discount to £1,500 for smaller retail premises with a rateable value of £50,000 or below.
Meanwhile, the Government is also capping the rise in the business rates multiplier at 2% in order to benefit all businesses.