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Tory MP calls for business rates to be scrapped and replaced by higher VAT
13 January 2021

Business rates should be scrapped and replaced by an increase in VAT in order to save high street businesses, according to a Conservative MP.

Kevin Hollinrake (Thirsk and Malton) said increasing VAT from 20% to 23% would fill the £30bn annual gap created from the abolition of business rates.

Introducing his Abolition of Business Rates Bill, Hollinrake told the Commons: “Last year alone 180,000 jobs were lost in retail in the UK. We need immediate change.

“My Bill does deliver immediate change. It abolishes business rates completely and replaces the revenue with a small increase in VAT.

“Thereby fundamentally levelling the playing field between online and our precious local high street businesses.”

He said he had taken into account his party’s general election manifesto pledge not to increase VAT during this Parliament, adding: “But the scale and the pace of change to the business landscape today necessitates a new approach today.”

He went on: “Business rates as they are today were designed for a bygone era, a long time ago where business went hand-in-hand with high street premises.

“Covid has quickly made that time seem even more distant and the trends already in train have been accelerated due to our forced house arrest.

Online sales now account for 33% of all retail sales, up from 20% only a year ago.”

Hollinrake continued: “In my view, we would be better to completely scrap business rates and apply a small increase to the sales tax we already have – VAT.

This would immediately level the playing field, would not create any additional bureaucracy or burden on the business, we would completely dispense with the convoluted business rates system including revaluations, check challenge appeal, annual bills and debt collection.

“It would liberate thousands of talented, intelligent, hard-working people in the Valuation Office Agency and survey practices across the country to find new career opportunities that would help drive the UK economy forward.”

Hollinrake gave an anecdote from the election campaign trail about his constituents’ concerns and said: “It was at one of my first hustings as a prospective parliamentary candidate in 2015 that a question came from the audience about a local electrical retailer that had just closed down.

“And the question that came was ‘what is the Government going to do about it?’ to loud applause from the audience.

“The irony was, of course, that the business had closed not due to the actions or the inactions of the Government but because the people in that very audience had stopped shopping on high streets and started shopping online.

The Bill was introduced without a vote, with a second reading scheduled for 15 January. It has little chance of making further progress in its current form without Government backing.

Retailers have been pushing for reform of business rates which they say place an unfair burden on retailers who must operate from high street or high profile locations, since they are based on (often outdated) valuations of the property from which they operate.

High street businesses are currently operating in a business rates holiday period, introduced by Chancellor Rishi Sunak to support them through the Covid crisis, but many warn that once business rates are re-introduced at the start of the next financial year, it will tip many more firms over the edge.

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