“If the Government is serious about kickstarting the economy, it can no longer afford to brush business rates under the carpet.” says John Webber, Head of Business Rates at Colliers, “ And the new Chancellor must address this question in the Budget on Thursday- particularly with the new 2023 Revaluation list being announced next week”.
The current system which provides £26 billion (net) for local authority funding is not fit for purpose and with a new Revaluation in April 2023 fast approaching, decisions need to be taken now if businesses are to be encouraged to expand and invest rather than close or downsize their bricks and mortar estate.
Colliers believes the Chancellor should address the following points on business rates in his forthcoming Budget:
- Limit any business rate increases in the next revaluation- Given the pressure on business from spiralling costs, wage growth, energy costs and inflation, no business should have to pay more than a 15% rise including inflation. For smaller and medium sized businesses, these increases should be limited to no more than 5/10% including inflation.
- Immediately remove downward phasing of business rates payments in the 2023 Revaluation enabling rate payers to pay their true rates liability immediately and not wait three years to do so. Given current levels of inflation, Colliers estimate that the implementation of downwards transition would mean retail businesses will pay £2.68 billion more in business rates than they should do in the three years of the new list. This could be disastrous for the high street and would impact on decisions to either close or keep open stores in several regional high streets.
- Address the Multiplier (the UBR used to calculate rate bills) and rebase to a sensible level that businesses can afford. At current levels at over £0.51, it is just too high. If it could be reduced to say 34 p in the £1, as it was in 1990, many of the extremely high rating bills would be diminished into something businesses could meet. At the very least the multiplier must not increase in the 2023 Revaluation, however high the inflation figure is.
- Look at the whole systems of reliefs. Re-basing the multiplier to something affordable will mean that the whole question of the myriad of reliefs can become simplified and resolved. The current relief system has become incredibly complex and has created business rate deserts in some parts of the country. Colliers believe reliefs should be reviewed at every revaluation cycle – at least every 3 years
- Extend Empty Property Rates Relief -Instead of only the warehouse and industrial sector receiving the 6 months empty rates holiday this should be extended to the retail and office sector.
- Introduce Annual Revaluations– the ideal would-be annual revaluations – so that assessments reflect values at the antecedent valuation date more accurately during the life of a list, reducing the likely significant shift in liability following a revaluation. This provides greater certainty for businesses. Once a short period is established between revaluation cycles, any transitional scheme is unnecessary
- Reform the Appeals System, providing more support to the VOA- Recent tinkering with CCA and removing the Check part of the system has only added to the confusion of this ill-equipped system and placed more of an administrative burden on rate payers, particularly with the request for the annual provision of information. The system should be transparent, easy to access and allow appeals to be resolved in 12 months. Currently only those companies that can afford professional advisors get to the right answer.
- Review Plant and Machinery- There should be a wholesale and then regular review of what is or is not rateable in relation to plant and machinery. All plant that is an integral part of the trade process should be exempted from business rates as should be investment in new technology that make businesses more green/ sustainable. This would allow the rating system to complement government policy and targets.
- Consider introducing an on-line sales tax/ delivery tax – to reduce the discrepancies between what on-line retailers pay in business rates tax and the physical high street retailer. An online sales tax should be an amelioration not as a total replacement of the current system. 89% of Colliers’ snapshot survey of retail clients and contacts ( taken in April this year) said yes to a new tax- provided it took the pressure off business rates in the High Street.
- Take a proper look at Local Authority financing. Government must investigate new funding sources for councils as confidence in the current system dwindles. In addition to an Online sales tax the government should look at Council Tax funding too.
- Register of rating advisors similar to the FCA to make sure the cowboy and criminal element that prey on businesses who do not understand the complicated process of dealing with appeals and reliefs get the best advice from professionals.
John Webber added, “Jeremy Hunt has long admitted that the business rates system is in need of reform and now is his chance to do something about it. The current system is over-complicated, opaque and basically too high.
We need a well-managed and transparent business rates system, and we need it now. The government obviously has a multi-billion pound deficit to fill in its Budget- but continuing to strangle businesses and destroy the high street certainly won’t be the solution to the problem.”