Pandemic could force business rates reform

One unforeseen consequence of Covid-19 is that the pandemic may have fast-forwarded business rate reform, according to a report out this week.

The new report endorsed by the CBI says the need for change is now more urgent than ever with virtually every sector adversely affected or under strain.

In the latest report – Over-rated – making the case for business rates reform – the authors claim without reform the current multiplier used to calculate business rates each year – currently at 49.9p in the pound – will continue to climb. The research claims that businesses will be paying an extra £6bn over the next five years, if unchecked.

The Report sets out 12 actions that combined would save businesses around £21.8bn over five years. These include:

• For the remainder of the 2017 revaluation period (up to 2022/23), the Government should freeze the Uniform Business Rate (UBR) at its current 49.9p and slash the CPI index-linked annual increases – estimated saving £0.8bn.
• For future revaluations, the Government should reduce the business rates’ burden by fixing the UBR at a much lower rate aligned to rental growth.
• The Government should offset the cost of delaying the switch from RPI to CPI, which equates to a reduction in the UBR from 49.9p to 44p – estimated saving £17.7bn.
• Delay the next valuation date until October 2021, shortening that valuation period to 18 months. Subsequent revaluations should be reduced to 12 months.
• Reliefs should continue to be targeted to support the most vulnerable businesses.
• Remove transitional arrangements for properties whose rateable values decrease but keep supporting for those whose rates increase. Estimated saving – £2bn.

CBI’s North West director, Damian Waters fears that left unchecked business rates will continue to rise which will have a huge knock-on effect by scuppering investment and exacerbating the North/South divide, between England’s wealthiest and poorest regions.

“The Government gets it and knows that action is needed,” he said: “It’s a real drain on many businesses and that’s why business rates relief was one of the first levers the Government reached for in their business support packages in Spring. But the pandemic has fast-forwarded the need for wholesale change.

He added: “Reducing the overall burden of business rates has the potential to realise wider economic benefits, increasing tax revenue elsewhere in the system. Reliefs need to be fair and equitable. Fundamentally, the tax needs to be fit to meet the dynamic challenges of the 21st century and encourage, not detract, from business decision making.”