Will Struggling UK Retailers Ever Be Relieved of Business Rates?

Business rates are a tax paid by owners or tenants of most forms of commercial property in the UK, with the rate of tax based on the value of the property in question. The PDF attachment explains what the rateable value of a property is.

The root of the current business rates tax can be traced back to Elizabethan times, when the Poor Law of 1601 was introduced as a way to give local parishes the right to collect funds that could be used to feed the poor and pay for workhouses.

Retailers today are calling for reform on this tax, which is causing many businesses to struggle or even close. Last year, business rates generated around £29 billion for the Treasury, from approximately 1.8 million liable businesses. The recent rates hike has been causing concern, with many businesses being forced to close or downsize dramatically. Business lobby groups including the British Chamber of Commerce and the Confederation of British Industry have called for changes to the system.

Specialist business rates company RVA Surveyors works with individuals and businesses in the UK to achieve savings, navigating the complex ratings system to discover if there are any rebates or reductions that can be applied.

Rates Revaluation

Much of the root of the complaints revolves around the fact that the most recent property revaluations for the purpose of setting business rates were delayed by the government for two years. The revaluations are supposed to occur once every five years, but the government in 2015 decided to wait two more years in order to avoid a political headache.

The upshot of this is that many businesses are now facing significant hikes in their business rates liability as property values have changed a lot over the past seven years. This is particularly true for retailers with properties in areas where business rents have increased a lot, such as central London.

The UK Government did point out in the wake of complaints that there had been a transitional relief scheme introduced to try and soften the blow, which the short video attachment explains. Business taxes in the UK are already high when compared to other countries and the recent revaluation has left many independent and major high street retailers struggling.

New Retention System

Business rates have historically been used for the funding of public services within each local authority. Until April 2013, the distribution of these funds was organised by the government, with all funds being paid into a national pot and then redistributed as required.

In 2013, the system changed to give local authorities more control, keeping up to half of the income generated and sending half to the national pot to be distributed as grants. The idea behind this change was to incentivise local councils to promote growth within each region to increase the amount of income they receive from business rates. However, the results so far have resulted in more uncertainty and risk. The infographic attachment outlines a proposed pilot scheme to increase local rates retention to 100%.

Government Resists Reform

The UK government has so far resisted calls for a reform in the business rates system, with Chancellor Philip Hammond stating that there had been no consensus found on an alternative base from a 2016 business rates review. This statement was made in response to a select committee of the parliament’s Treasury. Mr Hammond did state that a better way needed to be found of taxing the digital economy, in response to protests regarding the perceived unfair advantage of online retailers over traditional brick and mortar shops.