The CBI has long been calling on the government to urgently reform the business rates system and put business rates back on a sustainable path to supporting investment, economic growth and prosperity across the whole of the UK. We have therefore welcomed the government’s review of the business rates system and their subsequent call for evidence.
The call for evidence covers a whole range of issues that businesses have been grappling with for many years, from transitional relief to plant and machinery. As business rates is such an important but complex area, the decision to consult in two tranches provides businesses with the necessary time to contribute effectively towards the debate.
Businesses are facing heightened uncertainty, both because of the continued economic impact caused by the pandemic, but also because they are looking ahead to the end of the transition period of the UK’s departure from the European Union and future trading arrangements with the bloc. Despite this, business rates reform remains at the top of business’ agenda. Getting this right is critical to supporting businesses as we look to rebuild the UK economy and build back better.
As the government and business look to build back better, there is an opportunity to re-think the future of the business rates system. Businesses need certainty to be able to make investment decisions that will deliver the economic growth needed to help rebuild the economy. Business rates reform has a part to play in both incentivising green investments in the stock of commercial property and in ensuring these investments, and by extension growth, is distributed evenly across the country. To help achieve these policy objectives, business rates reform should focus on creating a fair and sustainable system in the long-term, which will require fundamental change from the status quo.
We believe the best way to achieve this is by reforming the existing system so that it not only works more effectively for businesses across the economy, but so that it also promotes sustainable public finances.
To achieve a fair and sustainable business rates system that promotes economic growth and prosperity, the CBI propose a set of recommendations for immediate action. These include:
- Review the current suite of reliefs available to ensure they are correcting clear market failures and represent good value for money
- The government should remove transitional arrangements for properties whose rateable value decrease following a revaluation, so the business rates bill of those properties reflects the true rateable value; while upwards transitional relief should be maintained to allow a smooth transition to a new higher business rates bill for those properties
- The government should consult on alternatives to transitional arrangements that support those businesses facing a sudden increase in their business rates bill, while allowing those facing a decrease to move to that new bill immediately. Moving to annual revaluations would negate the requirement for transitional arrangements
- The government should also consider the impact cliff-edges have on business, for example the current business rates holidays will see businesses going from not paying any rates one month, to pay full rates the next month. This should be considered as part of the wider support package for businesses as they recover from Covid-19
- Delay the valuation date to 1st October 2021 to shorten the period between the antecedent valuation date (AVD) and the start of the next revaluation period, to ensure the tax more accurately reflects the economic situation and allow a more stable property rental market post-Covid-19. Subsequent revaluations should consider reducing this period to 12 months
- For the remainder of the 2017 revaluation period (up to 2022/23), the government should freeze the Uniform Business Rate (UBR) and therefore not continue to index it in line with CPI
- For future revaluations, the government should fix the UBR at a lower and sustainable rate so that any business rates revenue growth relates to growth in rental values. The exact cost to government will depend on the level the UBR is rebased to.
The CBI also recommends that the government should look to move towards annual revaluations, as this would simplify processes and negate the requirement for many of the above recommendations. We will address what will be required to meet this objective in our tranche 2 response.
You can download our full submission below. Please get in touch with Adriana Curca for further information on the CBI’s business rates work.