Government launches another business rates review – but will this one be different?

Business rates

Larger retailers were left disappointed by Chancellor Rishi Sunak’s budget today, since it provided no business rates relief for them. Small businesses, in properties with a rateable value of £51,000 or less, will have their rates scrapped for a year, however. And Sunak has promised yet another review of the entire business rates process. Should retailers hold out for meaningful action this time?

Well, past experience suggests they might not want to get too excited at the prospect. This business rates review is the 155th policy paper or consultation launched on the subject since 2010, according to experts, and yet still we have a rates system, that the British Retail Consortium has not tired of telling us, is not fit for purpose.

Among these 155 papers or consultations, was what was billed as “the most wide-ranging review of national business rates in a generation” announced in 2015, and a “commitment” in 2014 to conduct a review, rates experts at Altus Group uncovered.

Sunak told MPs his review would aim to reduce the overall burden on businesses, improve the current system and consider “more fundamental changes in the medium-to-long term.”

The Treasury added: “Business rates are less distortive than other taxes, easy to collect and hard to avoid.

“However, the Government also recognises concerns about the impact of business rates on ratepayers, including on the high street, and the potential need to modernise our tax system.”

It is the first time the Government has said it wants to reduce the tax take, which brings in around £32 billion a year, having previously said it wants to keep the tax “revenue neutral”.

In the Budget book, the Chancellor added that an extra £11.5 million would be added to the Valuation Office Agency’s budget to help officials carry out work running the system and improve huge delays to appeals.

The Treasury added it would focus on four key areas, including changes to transitional relief taxes, whether the tax should continue to be calculated using commercial rental values and improving administration.

Officials also said a key change could involve exploring alternatives to business rates, “particularly within the taxation of land and property”. The review is expected to be completed by the autumn, the Treasury added.

Alex Probyn, UK president of expert services at Altus Group, a business rates specialist, said: “The difficult questions have already been asked. Reform of the system is within our grasp with political will.

“If we are serious about ‘levelling up’ the economy to help struggling towns, tax demands must fall in line with declining rents whilst respite to the financial burden can be delivered through the ending of annual inflationary rises to the tax rate using growth instead to drive revenues.”

But some in the industry are concerned over the numerous promises from ministers over the last decade for rates changes. Back in 2015 the then chief secretary to the Treasury, Danny Alexander, said: “The worlds of commerce and industry have changed beyond recognition… now the time has come for a radical review of this important tax.”

British Retail Consortium CEO Helen Dickinson said Sunak’s failure to address the stress large retailers are under at the moment was disappointing. “In April, these retailers will face yet another rise in business rates across England, piling on even more pressure on shops at a time when they are squeezed by lower demand and increasing costs arising from coronavirus,” she said.

However in scrapping business rates completely, for this financial year at least, for smaller retailers, Dickinson said Sunak had shown he was prepared to make some “bold decisions” so there’s hope that attitude will be taken into the review process.

“[This] this will be critical to the upcoming review of the broken business rate system. We welcome the stated objectives of reducing the rates burden on business, something we have been calling for, and the inclusion of changes to transitional relief as an option to provide short-term relief from April 2021.

“It is vital that the burden is reduced for all retailers – large and small – if it is to promote further investment in productivity growth and higher skilled, better paid jobs. We hope this open-minded approach carries through to implementing positive changes once the review has concluded later this year,” Dickinson said.

While the major chains have been left disappointed today, there’s a chance they may get their much needed reward when this review is completed.