UK Government Set To Scrap Plans For Additional Tax On Businesses

Lisa Ugur, Tax-news.com, London

21 March 2001

According to a report in the Financial Times this week, it looks like the government many well scrap plans to permit local authorities in the UK to impose a "supplementary rates bill" - in other words a tax - on businesses which, it has been estimated, would cost companies as much as £1bn a year. No doubt the British Chambers of Commerce (BCC) will be delighted. From the very start it has criticised the proposals, which were published in the Local Government Finance Green Paper published in September 2000.

The original proposals were set to give local authorities the power to levy annual supplements to the national business rate of 1% a year for five years. The BCC estimated that this supplementary rate proposal could cost businesses in England an additional £2.75bn in the next 5 years, and more than £1bn each year thereafter.

In September last year, Chris Humphries, Director General of the BCC, commented: 'These proposals as currently drafted are yet another tax on business. The provision for business consultation is inadequate with the danger that yet again business picks up the bill for poorly controlled spending. Not only are these proposals likely to undermine the good working relationships that have developed between local authorities and their business communities, but they could also threaten local economic competitiveness.'

The FT said The Department of the Environment, Transport and Regions (DETR) will instead introduce legislation to allow councils to establish small Business Improvement Districts in which businesses will decide with councillors whether local taxation is justified. This will please the BCC, which said that it believed local authorities should first win approval for their plans from the business community and only then be allowed to levy a supplementary rate. As the proposals currently stand, local authorities can first decide to levy a rate, then seek agreement on how it should be spent.

As well as pressure from the BCC, Stephen Byers, the UK's Trade and Industry Secretary, is believed to have lobbied for changes to the DETR proposals.

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