Amongst the most frustrating subjects for businesses is the liability for business rates. On 16 March the Chief Secretary to the Treasury, Danny Alexander, launched “the most wide-ranging review of national business rates in a generation” with the aim of modernising the system for payment of this tax across England. The stated intention is to examine the current structure, the current use of properties by businesses and a review of other countries’ systems so as to ensure that any recommended changes reflect the radical progress in the worlds of commerce and industry.
The announcement of the review follows the commitment in December 2014 to conduct a review and to implement a £1billion package to reduce business rates in 2015/16. The aim is to support the smaller businesses and to ensure the future of our high streets. Whether or not what will be delivered will go anywhere near enough to make a difference is debatable but from 1 April 2015 the Government is to implement (amongst other things) the following:
- An increase in the relief to all occupied retail properties with a rateable value of £50,000 or below to £1,500 from £1,000 for the period to March 2016;
- Increasing by 100%, small business rate relief to 31 March 2016. Figures suggest that this will provide support for 575,000 businesses and take away liability altogether for 385,000 small business.
It is interesting to note that the Government does not consider that the provision of financial services nor the services provided by letting agents, medical service providers or professional services to be retail and therefore premises occupied by these service providers are ineligible for the reliefs.
The Government will reimburse those local authorities which use their discretionary relief powers to grant these reliefs and although the Government expects local authorities to grant relief the grant is discretionary and authorities may choose not to do so if they consider it appropriate.
The new discussion paper introduced by the Government on 16 March outlines a series of questions to be considered during the course of the review and invites comments from all interested parties;
- What evidence and data can you provide to inform the government’s assessment of the trends in use and occupation of non-domestic property?
- Is there evidence to suggest that changing patterns in property usage are affecting some sectors more than others?
- What, in your view, does this evidence suggest about the fairness and sustainability of business rates as a tax based on property values?
- What evidence is there in favour of the government considering a move away from a property based business tax towards alternative tax bases? What are the potential drawbacks of such a move?
- What examples from other jurisdictions and tax systems should the government consider as part of this review? What do you think are the main lessons for the business rates system in England?
- How can government use business rates to improve the incentive for local authorities to drive local growth?
- What impact would increased local retention of business rate revenue have on business growth? What would the impacts be on local authorities?
- What other local incentives should the Government consider to further incentivise business growth?
- Should business rates be reformed to make them more closely reflective of wider economic conditions and if so, how?
- If business rates remain a property tax, how do you suggest business rates could take into account the individual circumstances of businesses such as their size or ability to pay rates?
- How does the proportion of total operating costs accounted for by business rates vary by the sector and size of a business?
- What is the impact of the business rates system on the competitiveness of UK businesses? Are there any particular impacts on SMEs?
- How could the Government better target support for SMEs given that the size of a company may not be reflected in the rateable value of a property it uses?
- Should investment in plant and machinery, energy efficiency improvements or other similar property improvements, be treated differently by the business rates system? If so what changes could be made?
- What evidence and analysis should the government take into account when evaluating the impact of and any changes to the range of reliefs and exemptions present in the business rates system?
These are far reaching and searching questions and the information collated should, in due course, make interesting reading. The consultation closes on 12 June 2015 with the aim of reporting by Budget 2016.
We are all encouraged to submit comments, whatever our property interest or rate liability may be to firstname.lastname@example.org. The deadline for final contributions to the initial stage of analysis is 12 June 2015.