Business rate reform will always mean winners and losers
It has been a busy year so far for business rates – a very busy year.
Regardless of some very key court of appeal decisions that have affected business rates, Covid-19 has essentially turned the system into a business rescue scheme that enabled Rishi Sunak to get emergency funds to parts of the economy that other tax rebates cannot reach – as quickly.
Yes, the world has changed but business rates are still waiting on yet another review due out this autumn to be able to change and adapt with it. Despite being on the frontline of state handouts business rates have not really been on top of the news agenda in terms of a long-term planning post-Covid lockdown. There was no mention of it at all in the mini budget last week.
Regardless, the review will be here quicker than we think so I thought it worth recapping what the objectives are:
- Improve the current business rates’ system
- Consider fundamental changes in the medium/long term
- Reduce the overall burden on businesses
If only it were so simple. The objectives sound reasonable but as I covered in my last article, we can’t underestimate the changes that would need to be brought into play to make it happen. We have had decades of tinkering around the edges of business rates by successive governments that have led to a slew of cases making their way to the Tribunals, Court of Appeal and the Supreme Court.
If you look at cause and effect, no matter what proposals are put forward and adopted there will be consequences – there is no such thing as a tax system where everyone comes out a winner.
Areas the review can look at include reducing the multiplier – this is only possible if the Government drop their “fiscally neutral” stance that has held back other reforms. However, having seen business rates being used as a tool over recent weeks to deliver financial aid, Sunak may have already come to terms with the fact that the business rates’ cash cow cannot continue to be milked in the same way as before. If the multiplier comes down, then so does the tax take but that has already happened during Covid and will continue well into 2021.
One of my bug bears has always been the raft of reliefs that have been added to business rates over the years, each adding another not-so-subtle layer of complication to the system. This invites avoidance schemes that, again, tie up the Valuation Office Agency (VOA), the Billing Authorities and the courts as the lawyers pour over the minutia of the wording and interpretation. Simplify the reliefs through sensible reform and the benefits should outweigh the negatives longer term. The VOA has also been cut to the bone during austerity and we need to see a fully funded and staffed agency that is there to help businesses, not become a barrier to fairness due to a scandalous lack of investment.
Having seen the reviewed appeal system in action now for just over three years, I would love to see wholesale reform of the Check Challenge Appeal system, but this was only introduced relatively recently and so to scrap or reform it to any significant degree would be to admit it was never fit for purpose in the first place – a first for this Government, even with an 80-strong majority to give it a backbone.
There are other ways in which the business rates system could be made fairer but until the Government and its detractors realise every action has a consequence – good and bad – we will never see true reforms make a difference.
London Mayor Sadiq Khan is the latest big name to call on the government to extend the business rates holiday beyond April 2021.
The retail and hospitality sectors are mobilising the troops with dire warnings that thousands of business are at risk if the rates holiday isn’t extended beyond April 2021.
The pandemic has led to more than 50,000 extra appeals being lodged against business rates by Scottish firms alone.