Government announces fundamental review into business rates

What have the government announced?

Hidden within the business tax section of the budget document, is “the government is launching a fundamental review of business rates to report in the autumn”.

Alongside the Budget document, the government have published a Terms of Reference for this review, which sets out the objectives, the scope of the review and the government’s next steps. In summary, the Terms of Reference says the following:

• The context: The government’s view is that revenue should continue to be raised through the taxation of non-residential land and property, while recognising that the business rates system as currently stands needs updating
• The objectives: The government’s aim is to reduce the overall burden of business, improve the current business rates system and consider more fundamental changes in the medium to long-term
• The scope: It will focus on four main areas:
  1. Improvements that could be made from April 2021, alongside the forthcoming revaluation, including regarding the transitional relief scheme
  2. Reforms to the current system to put the tax on a more sustainable basis, including whether open market rental values remains the best base, the effectiveness of different reliefs, how to minimise the impact on investment, how the multiplier should be set and who pays the tax
  3. The administration of business rates
  4. Exploring alternatives to business rates.
• Next steps: A call for evidence will be published in Spring 2020, which the government will report on at the Autumn Budget 2020.

What does this mean for business?

This is a great first step to achieving a fair and sustainable business rates system that works for all business. Over the years we have seen too many sticking plasters, which have had very little impact on most ratepayers. A fundamental review is what is needed to allow policymakers to make reforms to the system that have more impact to business.

The scope appears to be wide enough to enable the government to work with business and other stakeholders to investigate the key areas where the current system is failing and develop reforms to address this.

This review provides a real chance for businesses to shape what the future system will look like.

How will the CBI be responding?

The CBI will be drafting a response to the call for evidence once this is published in the Spring, setting out our ideas for reform. This will have a particular focus on the key principles we have already developed that a reformed system should be based on including: a fixed tax rate, frequent realignment with the economic cycle, incentivises investment, removal of the rule of fiscal neutrality and a system that works with possible devolution.

To get involved in the CBI’s response to the call for evidence, and/or the CBI’s business rates policy work more generally, please get in touch with Megan Bulford.