Business Rates are fit for purpose – if Governments stop tinkering with the system
Chancellor George Osborne has dropped strong hints that the Government will include measures to provide some relief to ratepayers on the rates burden in the December Statement next week.
Small firms who have been taking a fresh look at their Autumn Statement "wish list" have already been told by the Chancellor that help is on the way. He dropped his biggest hints yet that the Government will include measures to provide some relief in the December 3 statement.
There has also been positive signs from the Business Secretary Vince Cable who also provided a strong signal that "something positive" is scheduled on the rates front – hinting that the Lib Dems should take the credit here.
Never have Business Rates featured so heavily in the headlines as this year with sustained pressure from many vested interests and lobby groups all clamouring for "reform".
I may be a lone voice but I do not believe the principles of the rates system need reform – it has stood the country in good stead for hundreds of years – things start to go wrong when politicians constantly tinker around the edges, offering relief here, small reform there and then changing it back again when political circumstances dictate. When you look abroad there is no better system than ours out there, if there was we would all be using it by now but in fact a number of other countries employ our system.
High street retailers are currently clamouring for help so they can compete with online retailers who don't have the same business rate overheads on their premises – but why should the likes of Amazon be penalised just because they have found a successful business model that the consumers like? You don't hear Aldi and Lidl asking for business rate rebates because they have found a business model that works for them and have adapted to the changing markets. We didn't hear Sainsbury or Tesco calling for reform when they were pulling shoppers off the high streets to their out of town superstores with free parking? So they have to adapt and the likes of Amazon shouldn't have to subsidise their survival.
Another area that needs simplifying is Small Business Rates Relief – SBRR – why do we have 100% relief for businesses who fall under the £12,000 RV threshold? Why not just exempt them all and save a lot of red tape and time by making them apply for it?
The Rating system has coped with economic depression and boom over the hundreds of years that it has existed. The reason that business rates remain in the headlines is because of the postponement of the Rating Revaluation due in 2015. That would have led to an automatic correction in rateable values but the Government postponed that for two years, keeping business rates artificially high in many areas and serving the needs of wealthy London based brands who were bracing themselves for a substantial hike. Thankfully we are back on track for a Revaluation in 2017 now confirmed and based on rental values as of April 1, 2015.
Some people have asked for revaluations to be more frequent – annual even – in my view that would lead to a system that is responsive, reflecting economic growth and decline. The current system costs around 5% of the revenue it generates to administer; it is one of the cheapest in the world. Increased frequency would solve the problems currently being experienced supporting this successful taxation system.
More recently after the Scottish referendum we have seen calls for more regional powers under a "Localism" agenda with business rates being set and controlled at local or regional level. But we have tried that before – pre-1990 – saw that model in place and it led to massive disparities between rival authorities, so the system was changed. And as fed up as many people are being dictated to by faceless politicians in London, it is worth taking a look at the people who run our town halls and really think about the stability required for business to grow successfully. We have stability with the Uniform Business Rate we simply need to stick to the planned Rating Revaluations.
There are so many groups with vested interests vying for the ear of the Chancellor he has a difficult job on his hands; keeping the economy moving forward, tax revenue coming in but he also has to be seen to be listening in the run up to the next General Election. I don't have any axe to grind but I do have over 20 years working in Rating, dissecting decision after decision over the decades in UK tribunals. So, my vote goes to the Chancellor who:
· DOESN'T REFORM THE PRINCIPLES OF THE RATING SYSTEM – but sticks to the framework that has been with us since the Poor Relief Act 1601.
· TAKES SMALL BUSINESSES (under Rateable Value £12,000) OUT OF THE SYSTEM – they don't need to be there and it clogs up the system. It will also vastly cut down on the number of rating appeals and kill the market for rating appeal 'cowboys' who rip off thousands of small businesses every year.
· LOOKS AT MORE FREQUENT REVALUATIONS – aligning the system with the market as the purpose of Revaluations was originally envisaged.
Anyone who would like to chat over these issues can contact me at firstname.lastname@example.org.
Some interesting stats are coming out of the VOA at the moment, with so much attention on the Revaluation and its implications for businesses and retailers.
The VOA has finally released its own figures on how the change in the Rateable Value (RV) of non-domestic properties will affect the regions, following the recent revaluation. The...
The Government has launched another consultation, this time on the transitional arrangements for the 2017 rating revaluation.