31 Oct 2019
Policy area: Tax & Finance
British Property Federation Welcomes Treasury Select Committee’s Report on “broken” Business Rates System
31 October 2019, London: The British Property Federation (BPF) has today welcomed the Treasury Select Committee’s report into the impact of business rates on business. The Select Committee emphasised that ‘it is clear change is needed to the current business rates system’, making note of the growing rates burden on businesses, the current system’s lack of responsiveness and the inadequate appeals process.
As the voice of the UK commercial property industry, the BPF has led calls for the tax to be reformed and gave both written and oral evidence to the Select Committee inquiry.
Commenting on the Select Committee’s findings, Rachel Kelly, Senior Policy Officer at the British Property Federation, said:
“The Treasury Select Committee’s report makes an important and timely contribution to the growing debate around business rates, and will no doubt add to the momentum for change. What is clear is that the total business rates burden is not sustainable and should be reduced, or it will continue to harm our economy and town centres and hold back investment that we need to make our workplaces more productive and energy efficient.”
“It is vital that the next government puts business rates on a more sustainable trajectory. We strongly agree with the Committee that the business rates system must be reactive to changes in the modern economy, and that is why we have argued for revaluations to take place more frequently, ideally annually.”
Business rates have become an increasing burden on businesses and have had a negative impact on investment. The Treasury Select Committee report highlights that business rates revenue has increased above inflation over time. The report notes that business rate revenue stood at £8.8bn in 1990 and increased to £27.3bn in 2017/18. This represents an increase of 210%, considerably above the 75% increase that would be expected if it rose in line with inflation.
As a result, the UK has one of the highest property-based taxes in the OECD. The committee cite evidence that property taxes, including business rates, make up 12.6% of total tax in the UK, much higher than the OECD average of 5.6%.
The current business rates system has also become complex and incoherent, with a broad range of exemptions and allowances that are often arbitrarily enforced. Echoing the BPF’s concerns, the Select Committee noted that ‘the number of reliefs that are needed for business rates to work indicate a broken system’.
It is vital that the next government works with all stakeholders to create a more coherent system that can respond to changes in the economy and to the performance of individual sectors.
The BPF has also welcomed the Select Committee’s cognisance that business rates act as a significant disincentive to investment. One example of this is that in the current system, businesses can find that their rates burden increases if they make investment in greener technologies, which is counter to government policy and the efforts of the industry to reduce carbon emissions.
The BPF has consistently argued that the valuation process is not transparent, which leads to a greater number of appeals and uncertainty. The Treasury Select Committee agreed with this point, noting that the “Valuation Office Agency must be more open with business about the evidence on which they base their valuations”. It also took aim at the inadequate appeals process, used by businesses to challenge valuations, with some appeals from the 2010 revaluation remaining unresolved. The Select Committee argued that ‘such long delays bring the work of the VOA into disrepute and undermine trust in the UK tax system’.