Reform business rates, say MPs

The current system of business rates is not fit for purpose and needs to be fundamentally reformed, says an influential committee of MPs.

In a report issued on 4 March, the Business, Innovation and Skills Committee called for a wholesale review, going beyond the administration of business rates, to examine whether retail taxes should be based on sales rather than the rateable value of a property; whether retail needed its own system of business taxation; and how frequently revaluations should take place.

In the interim, the committee called for a six-month business rates amnesty for businesses occupying empty properties, going further than the 50 per cent reduction announced in the 2013 Autumn Statement, to encourage new businesses to the High Street.

The committee also recommended that in the interim the government review whether business rates were more appropriately linked to the Consumer Prices Index (CPI) or Retail Prices Index (RPI) of inflation and called for annual increases to be linked to a 12-month average of either RPI or CPI, with a cap at two per cent. This would replace the current link to a monthly snapshot of RPI.

Committee chair Adrian Bailey said: “British retail is a global success story.  Employing around three million people, it is the largest private sector employer in the UK.

“But its traditional home – the High Street – is struggling under a system of business rates that comprises one of the highest forms of local property tax in the European Union.

“Business rates are the single biggest threat to the survival of retail businesses on the High Street.  Since the system was created the retail environment has changed beyond all recognition.  A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.

“This is a time for wholesale review and fundamental reform, not for tinkering around the edges.  Business rates are not fit for purpose and minor administrative changes will not alter that.

“If High Streets are to become thriving community hubs and start-ups are to invigorate our town centres, the significant barrier to innovation currently posed by business rates must be addressed.”

Link: The committee’s report