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Guarded Welcome For UK Business Rates Review

by Robert Lee, Tax-News.com, London

05 December 2014


The British Property Federation (BPF) has commended the Chancellor for announcing a "structural review" of UK business rates (property tax), and advised that any future reform should benefit all taxpayers.

As part of his Autumn Statement mini-Budget, George Osborne announced that the structure of business rates will be reviewed in time for Budget 2016. He also revealed that the inflation-linked increase in business rates will remain capped at two percent and that small business and "high-street" reliefs will be enhanced.

The BPF has in the past recommended that the Government commit to a fundamental reform of the business rate system as the best means of restoring fairness and creating a beneficial environment for investment and growth. According to Chief Executive Liz Peace, the regime must be more responsive, both to changes in the economy and to the relative position different businesses find themselves in.

Peace said: "Basing a property tax on nine-year-old valuations is simply unfair and inefficient, and other countries have shown that with the use of technology you can design a far more responsive system. The compounding effect of annual Retail Price Index (RPI) increases is also meaning that a higher proportion of taxation each year is coming from business rates, sucking the blood from our high streets and eroding many other businesses' competitive edge."

The BPF has urged that any future changes should not purely help high-street retailers to compete with internet outlets. Peace said that the review should be "no-holds-barred" and benefit all sectors of the economy.

A recent BPF report recommended that the Government move to annual uprating based on the Consumer Price Index and restore the pre-2008 availability of relief from empty property rates. It also called on the Government to introduce a system of annual revaluations and exempt the least valuable properties from rates.

The timetable provided for the review has nevertheless raised concern. Simon Tivey, Partner at professional services firm PwC, said that 1.8 million ratepayers will be disappointed that the review is "being put off" until 2016.

According to Stuart McCann, a property tax expert at lawyers Pinsent Masons, businesses should not expect much movement on this until after the 2015 general election.

Pinsent Masons has noted that, as the review is to be "fiscally neutral," it may not prove very helpful overall. However, as John Longworth, Director General of the British Chamber of Commerce, stressed: "Businesses will not tolerate anything less than a full root-and-branch review." He warned that, "unlike previous attempts, this review must deliver fundamental change."

TAGS: tax | investment | small business | business | property tax | tax incentives | law | United Kingdom | internet | tax rates | tax reform | retail | inflation

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