Government urged to look at alternatives around Business Rates

Posted on: December 3rd, 2019

In its report into the impact of business rates, published on 31 October 2019, the House of Commons Treasury Committee calls on the government to examine alternatives to the business rates system. Its view is that: “Tweaking the current system of business rates through an increasingly complex web of reliefs does little to address the negative aspects of this tax and simply demonstrates how broken the system is.”

The report finds that since business rates were introduced in their current form in 1990, the revenue they have generated has outpaced inflation. They are also growing as a proportion of the total tax paid by businesses. In 2018–19, £31 billion of government income was raised through non-domestic property rates, one of the seven highest grossing taxes in the UK.

Findings in the report include:

  • The incidence of business rates does not fall upon all businesses equally, with a far greater cost placed on businesses that need a physical presence to trade as compared to those that can rely more on an online presence.
  • The appeals process is not efficient enough and the current statutory response times are too generous—16,000 appeals to the 2010 listing remained outstanding as of March 2019.
  • Potential alternatives to the current system, including land value tax, online sales levy, sales or turnover tax, profits tax, single consolidated tax and hybrid tax, combining elements of different tax types. However, more work is needed before any single alternative could be recommended.

The report concludes: “It is clear change is needed to the current business rates system.”

While none of the alternative systems presented to this inquiry have demonstrated that they are a clearly superior alternative, the report urges the Government to be proactive and creative in exploring alternative options to such an important source of government revenue.

All business owners are aware of the burden business rates place on the financial health of their companies and this report will be an interesting read to our business clients, as its recommendations will be nigh impossible for the government to ignore. Hopefully, some welcome changes to the business rates system are on the horizon.

For more information on business rates and how it could affect your business, please contact Eve Laws.