Autumn Statement business rates face review
Chancellor George Osborne has said there will be a full “structural review” of the unpopular business rates system.
The review will examine the “complex structure” of the system, which has been on place since 1988. However the outcome is expected to have little effect on the total sum collected.
The current system has been criticised for leading to big discrepancies in bills. Companies with similar turnovers can pay wildly different sums for business rates because their properties have varying “rateable values depending on the size and location of their premises.
Helen Dickinson, head of the British Retail Consortium, said “We want a system that brings investment and jobs to high street without punishing retailers who trade online because rates are so expensive.”
Claire Kober, chair of the local Government Association’s resources board, urged the government to take into account the impact of e-commerce as part of the review.
“Councils could do much more to support small businesses if we were able to set rates and discounts locally,” she said “It will be crucial that government’s reform of business rates make this a truly local tax.”
The chancellor also announced that the discount for retailers with properties that have a rateable value of less than £50,000 would be increased by £500 to £1,500 next year. The rise will bring the total relief on business rate to £1bn and help some 500,000 companies.
Business rates are handled differently in Scotland and Northern Ireland. The Treasury said on Wednesday it has agreed with the Welsh Government to give it full control of business rates in Wales.
The rates paid in by English businesses are the highest of any European Union country and can be a company’s biggest expense after wages and rent.
Demise of the high street
The rise in online shopping has been credited with the demise of the high street, with more than 100 shops closing down every week across the UK.
Business rates, which are charged on bricks and mortar shops, have placed the high street at a further disadvantage to its online rivals.
George Osborne said he would also continue to cap the increase in business rates at 2 per cent, which is below RPI inflation.
In a boost for small businesses looking for loans, the Chancellor also extended the funding for lending scheme until 2016.
Banks will receive up to £500million at cheap rates in return for lending to small firms.
The moves were praised by shops, pubs, cafes and restaurants, although many expressed disappointment that the findings for the review would not be presented until 2016.
While shops pay high business rates for premises in central areas and high footfall, companies such as Amazon – which has a huge warehouse in South Wales, where land is cheaper – pay much lower rates.
There are also anomalies in the system which leave some large retailers and department stores paying less than smaller businesses for their high street stores.
Last year, it was reported that a fashion boutique in Rochdale had been forced out of its shop by sky-high business rates that saw it charged more per square metre than Harrods.
The fact that bricks and mortar businesses are based in high-tax areas, while online retailers do not need such a physical presence, does penalise the high street.
The business rates system is badly designed and there is lots of room for improvement.