John Webber, Head of Business Rates Speaks at Fringe Event to call for Fundamental Reform of Outdated Tax.
John Webber, Head of Colliers' Business Rates team, is today for the first time, speaking at the Conservative party conference in Birmingham on the question of business rates- as part of its campaign to take its concerns right to the heart of government.
Speaking at a fringe event sponsored by the Centre for Policy Studies and Colliers: “Are Business Rates Killing the High Street”,John will be joined by other speakers including campaigners and MPs including Thomas Clougherty, Director of Research & Tax at the Centre for Political Studies (Chair), Vivienne King, Head of Real Estate Social Impact - The Good Economy, Nick Lakin, Group Director of Corporate Affairs at Kingfisher PLC, Anthony Browne MP and Kevin Hollinrake MP, a well-known critic of the current business rates system.
Colliers has been highly vocal in its call for reform of the business rates system, which unfairly penalises the retail sector who pay over a quarter of the total £26 billion (net) business rates tax bill, but whose gross value is less than 10% of the UK economy. High business rates have been cited as one of the key factors in the decline of many of the UK’s high streets.
According to Colliers Head of Department John Webber, “We have been trying to campaign for a proper reform of the business rates system for years;in particular to rebase the multiplier to a level that businesses can cope with – such as 30p in the £1 as opposed to the current 50p tax. And on the immediate front to make sure the government does not bring in a downward transition scheme following Revaluation 2023, which would limit the immediate rates bill reductions that the retail and hospitality sectors are entitled to and desperately need to see.”
Given current levels of inflation, Colliers has calculated that a downwards transition scheme would mean retail businesses, expecting a massive fall in their rates bills in line with rents, will in fact pay £1.65 billion in business rates more than they should do in 2023, and overall, £2.68 billion more than they should do in the three years of the new list. “This could be disastrous for the high street, particularly in the less affluent towns of the country.”
Webber adds: “If the Government states it is committed to removing downward transition it will look, on the face of it, to be giving a large tax cut -when in reality it isjust asking ratepayers in struggling towns to pay the correct amount.”
Webber has spent the last six months meeting with government members and MPs on both sides of the house and other government officials whilst closely monitoring the political debate about business rates. Colliers has also sent a newsletter to MPs explaining and highlighting business rates issues.
Webber continued, “Time and time again we have seen consultations on the business rates system and time and time again key experts outline the key reforms we need to see. Yet nothing meaningful ever happens. Proper reform gets brushed under the carpet or putin the “too difficult box”and the old system creaks on or is even made more complicated by new, unhelpful tinkerings to the system.”
“Despite promises in its election manifesto that the Conservative government would reduce business rates for those in the beleaguered retail and hospitality sectors and a new Conservative leader, the recent “Mini” Budget gave tax breaks left right and centre but largely ignored the “elephant in the room” - business rates, despite the impact that ultra-high rates bills have had on businesses in recent years.”
“Because of this we have stepped up our campaign to government. It is essential thatthose in power properly understand the debate so they can help create a business rates system suitable for business in the C21st. Let’s hope they listen today.”
Colliers Manifesto for Business Rates Reform includes:
- Limiting any business rate increases in the next revaluation- we believe no business should have to pay more than a 15% rise including inflation. For smaller and medium sized businesses, these increases should be limited to no more than 5/10% including inflation.
- Immediately remove downward phasing of business rates payments in the next revaluation enabling rate payers to pay their true rates liability now and not wait three years to do so. This could well impact on several decisions to either close or keep open stores in a number of regional high streets.
- Review and implement a policy to reduce the multiplier. (The UBR against which the rateable value of the property is multiplied to give the final rates bill.) This multiplier is currently around 51p in the £1- so is an effective 50% tax. If it could be reduced to say 34 p in the £1, as it was in 1990, many of the extremely high rating bills would be diminished into something businesses could meet.
- Look at the whole systems of reliefs. Re-basing the multiplier to something affordable will mean that the whole question of the myriad of reliefs can become simplified and resolved. The current relief system has become incredibly complex and has created business rate deserts in the country, where due to the system of small businesses reliefs, some businesses are paying no business rates at all for the services they receive. Colliers believe reliefs should be reviewed at every revaluation cycle – at least every 3 years.
- Extend Empty Property Rates Relief -Instead of only the warehouse and industrial sector receiving the 6 months empty rates holiday Colliers argue this should be extended to the retail and office sector.
- Introduce Annual Revaluations– so that assessments reflect values at the antecedent valuation date more accurately during the life of a list, reducing the likely significant shift in liability following a revaluation. This provides greater certainty for businesses. Once a regular and short period is established between revaluation cycles then a transitional scheme is unnecessary.
- Reform the Appeals System, providing more support to the VOA- Tinkering with CCA and removing the Check part of the system as announced this year has only added to the confusion of this ill-equipped system and placed more of an administrative burden on rate payers. The current system is designed to reduce access to justice for thousands of ratepayers – the system should be transparent, easy to access and allow appeals to be resolved in 12 months.
- Review Plant and Machinery- There should be a wholesale review of what is or is not rateable in relation to plant and machinery and these reviews should then be regular to avoid inconsistencies and criticisms of the system. All plant that is an integral part of the trade process should be exempted from business rates as should be investment in new technology that make businesses more sustainable.
- Consider introducing an on-line sales tax/ delivery tax - to reduce the discrepancies between what on-line retailers pay in business rates tax and the physical high street retailer. An online sales tax should be an amelioration not as a total replacement of the current system. 89% of our snapshot survey of retail clients and contacts ( taken in April this year) said yes to a new tax- provided it took the pressure off business rates in the High Street.
- Take a proper look at Local Authority financing. Government must investigate new funding sources for councils as confidence in the current system dwindles. We have already mentioned an Online sales tax. Looking at Council Tax funding should also be important.