In 2021, the Government issued a business rates roadmap that illustrated how they aim to reform the business rates system from the present to 2027 onwards. This has brought some disappointment to many associated with the journey, as they feel that all the big issues have not been addressed. Even though the government’s intentions were to make changes to improve the system, they are not intending to completely dismantle the system and create a whole new one.
The general election gives every political party an opportunity to rejuvenate the business rates system, with a long-anticipated business rates reform. Rerate encapsulate what each political party’s view is on tacking business rates if they win the election:
Conservatives
Rishi Sunak delivered a rather flat promise to ratepayers in his manifesto, by pledging to ‘ease the burden of business rates for high street, leisure and hospitality businesses, by supporting firms with a business rates support package worth £4.3 billion over the next 5 years to support small businesses and the high street’. But is this really going to resolve the problem of administering billions of relief top ups to businesses, in the long run?
Rishi also stipulated that they are going to raise the multiplier for distribution warehouses to hit the online retailers. How are these changes going to affect the larger businesses, who have been hit with a steep rise in the new revaluation?
It was confirmed in 2020 that a business rates reform needed to happen, and the Conservatives have yet to fulfil any actions from the consultation papers to action anything on this front.
Labour
For the past two years labour have presented a bold move to scrap businesses rates completely, so it was slightly disappointing on how vague the party was on how they would achieve this in their manifesto. They stated that ‘Labour will replace the business rates system, so we can raise the same revenue but in a fairer way. This new system will level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship’.
Regardless of the criticism of the current business rates system, there are many that are cautious about a complete overhaul of the current set up. The government is reliant on this source of revenue to efficiently fund public services. If there was any significant change in the current system, then there must be an equally efficient alternative method to collect this amount of revenue from the commercial property sector
Liberal Democrats
The Liberal Democrats brought out a document in 2018 and still strongly suggest in their manifesto that business rates would be replaced with a tax collected based around land values instead of rental values of commercial property. Also known as ‘Commercial Landowner Levy’, this would prohibit tax being charged on buildings and machines. Even though landowners would potentially rise their rents for their tenants, this would take away the problems that are currently present with empty buildings that haven’t been used for a long period of time. There may be also difficulty in retrieving information to prove who owns land, and there would be concerns for freeholders who are not receiving any rental income.
What rerate suggests the government do:
- Keep business rates as it is the most efficient way to collect tax
- Lower the multiplier so the government can scrap most relief, apart from discretionary and hardship reliefs. The majority of respondents in consultation papers in 2021 claimed that the relief system was overwhelming and challenging for the ratepayer to navigate. The majority also believed that the relief system was needed due to the burden of business rates. However, the reduction of the annual multiplier may negate the demand the number of reliefs being granted.
- Abolish business rates under a certain RV without the need for reliefs
