Wholesale reform of business rates ‘shelved until later date’

Wholesale reform of the business rates system has been “shelved until a later date”, according to a report in The Telegraph today.

The paper reported that minor changes were expected to be announced in the chancellor’s Budget on 27 October, but despite the government being committed to reforming the system, more time was needed.

A government spokesperson said: “We’ve provided extensive business rates relief worth £16b to support businesses and the high street throughout the pandemic, with support continuing until March next year.

“We’ve also shown we are committed to supporting investment through the tax system, extending the Annual Investment Allowance increase for another year and introducing the super-deduction – the biggest business tax cut in modern British history.

“We’re currently conducting a review of business rates which will conclude in the autumn.”

John Webber, head of business rates at real estate company Colliers, said the report was “massively disappointing” and frustrating given that the review had already been delayed four times in the last year.

“Delayed action will be a further hit to businesses – it will cost jobs and will do nothing to save the high street,” he said.

“The chancellor, at the very least, should commit to a reduction of the multiplier to around 30p when he stands up at the end of the month. That would provide a significant relief to businesses across all sectors, particularly those in retail and hospitality.”

Robert Hayton, UK president at real estate adviser Altus Group, added: “Doing nothing is contributing to the financial trauma or ruin of tens of thousands of businesses waiting for outstanding challenges to rates liabilities to be resolved. The chancellor needs, at the very least, to set strict targets for the Valuation Office Agency to focus on clearing the backlog of cases to facilitate the return of years of business rates overpayments. That’s not reform, that’s just doing their job.”

The government previously said its ambition was to develop a system that reduces the overall burden on businesses, puts the tax on a more sustainable footing and presents options for more fundamental long-term change.

A review of business rates was announced by the chancellor at last year's Budget and a call for evidence sought stakeholders' views on key issues including reforming the rates multiplier and looking at alternative ways of taxing non-residential property, which closed last year. The publication of the report has been delayed until the autumn when the government said there will be “more clarity on the long-term state of the economy and public finances”.

Over the summer, the government launched a consultation into businesses rates with plans for property revaluations every three years instead of five.

UKHospitality and the British Institute of Innkeeping (BII) supported the proposals but stressed that it could not come at the cost of extra reporting, restrictions on appeals and penalties, highlighting the need for more wide-ranging reform to redress an "unjust and imbalanced" system and the need to move taxation away from property.

Hospitality businesses paid no business rates for 15 months as part of the government’s Covid support package and eligible businesses are receiving a further 66% off their bills until March 2022, however it has long been argued that the burden falls unfairly on the sector. Earlier this year The Caterer reported that the hospitality sector was estimated to overpay by 300% relative to its turnover under the current system, equating to £2.4b. The Labour Party has pledged to scrap business rates altogether should it be elected.

Photo: HM Treasury / Flickr