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"Broken" business rates need reform - Treasury Committee Report - Dunlop Heywood
By Stuart Hicks, Director The Treasury Committee yesterday published its unanimously agreed report on the Impact of Business Rates across England and Wales and it’s pretty damning. Retailers, lobbyists and businesses alike have been waiting on this review for some time and it includes some rather scathing comments on the present system. The report runs to 55 pages and a total 37 recommendations so I won’t list them all, but there is a link below if you’ve nothing better to do this weekend. However, just so this isn’t the shortest article ever posted on PlaceNorthWest, here are a few of the more salient points and recommendations made, in no order of priority. Overall, 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, £31bn was raised through non-domestic property rates, making it one of the seven highest grossing taxes in the UK. The committee asks the question is this a deliberate policy of the Government and if so what is it trying to achieve? Members also make the point that business rates don’t fall upon all businesses equally and tweaking the current system 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. They list several inherent weaknesses: business rates reliefs are intended to reduce the financial burden placed on businesses but instead they are arbitrary, administered inconsistently and add complexity to a system that is already onerous. The proliferation of reliefs, seen as necessary to make business rates work, show the strain the system is under. Outdated or unneeded reliefs should be removed. Other reliefs should be improved; for example, transitional relief should be redesigned to ensure that, before the end of a rating list, businesses can complete the transition, upward or downward, to their correct rateable value. The VOA needs to resolve its large caseload of open appeals relating to the 2010 listing. It also needs to provide a better service for businesses trying to use its Check Challenge Appeal process for current valuations. They called CCA a “reasonable attempt” to address weaknesses in the previous appeals process but it is hardly a ringing endorsement. The current approach to business rates acts as an immediate significant disincentive to investment. Such an approach contradicts wider government policies such as reducing the UK’s carbon emissions through investment in greener technologies or improving productivity. It suggests that HM Treasury may wish to “consider lessons learnt by devolved nations” when they have made similar adjustments to their business rates system. The classes of plant and machinery that are included in the business rates calculation were last re-defined in 1993, when the UK economy operated very differently. Many modern businesses have moved away from being dependent on plant and machinery, making it unfair on the manufacturing sector for their business rates valuation to include their essential operating equipment. It is too easy for businesses to make speculative appeals and created an unsustainable workload …