Government ‘not in position’ to change business rates

According to a senior partner at Deloitte, the Government is “not in a position” to announce business rate reform in next month’s autumn statement.

Bill Dodwell, head of tax policy at the Big Four accountancy firm said research needs to be undertaken before “substantial changes” could take place.

Chancellor Osborne has been called on to overhaul the “outdated business rates system” as part of the coalition’s measures. Though despite hopes that next month’s statements could tackle the problem, Mr Dodwekk said it is unlikely.

Why the UK should not reform Business Rates

With the autumn statement around the corner, the Confederation of British Industry (CBI) and the Federation of Small Business are making it clear that they would like to see the business rates system completely reformed!

Rates being the system of taxation imposed upon land and property used for business purposes.

Their plans however also show why business rates should not be reformed.

The proposal are:

  • The reform of business rates and road improvements.
  • CBI’s demands include investment in roads; reform of business rates;
  • Federation of small businesses calling for infrastructure investment and action on business rates, as well as tax simplification and improved access to broadband.

Business rates are the closest thing the UK has to land value taxation and thus is a good tax; it’s also the least distortionary tax possible.

Businesses seem to disagree which is odd: for it’s not actually businesses that pay it in the economic senses. It is the Landlord.

For example, take a pub that is worth £960,000 in the centre of London suddenly taken and stuck in a more inbred area of the Fens or near some now closed mining village, its market value is more likely to be £0 a year. SO it’s the location of the building that creates much of the value: and that location and thus that value hasn’t been created by the landlord.

It’s all things that come with it being in London that do such as Tubes, buses, roads, just being in the middle of 10 million people. It is the society around it that creates that location value: seems fair enough to tax the landlord on a decent chunk of that value that society has created!

So why the complaints? First the valuations haven’t been changed in so long, so when changes do come, they’ll reflect current prices and be a major shock for many!

Second, major retailers aren’t happy that they have to pay high business rates, as they see it, even though it’s really their landlord paying when you have the likes of Amazon paying much lower rates on a warehouse in the middle of nowhere. This in itself is a ridiculous complaint because Amazon isn’t using expensive high street real estate.

The two large business organisations mentioned earlier essentially want more spending on making their locations worth more but do not want to be taxed on the value of their locations. They want all the benefits of public spending but don’t want to have to pay for those benefits. They asking that everyone else’s’ money be spent on increasing their land values and they don’t have to contribute themselves. To which request, of course, the answer is a swift and firm “No!”

In fact, far from reforming business rates in the manner they are asking, we could argue that the rates should be increased and be made much more like proper land value taxation. Though this would not fly in the current UK political scene.

Osborne to miss target to reduce backlog of business rate appeals

The chancellor is likely to miss his target for clearing the backlog of business rate appeals.

George Osborne originally vowed to clear 95% of the 170,000 appeals by July 2015 from firms that were disputing their tax bills.

The Valuation Office Agency (VOA) which assesses business rates for every commercial property has been referring thousands of appeals to the independent adjudicator, the Valuation Tribunal Service.

Around 69% has been resolved so far with many complex cases still awaiting adjudication. From the 79,000 property tax cases that have been referred since April, only 21,000 cases are listed with a hearing date. In the last four years only 14,000 cases have been heard.

Businesses Prepare for Revaluations

The business rates assessments for 2017 will be based on the property’s rental value on 1st April 2015.

For premises where the rental value is assessed having regard to trading receipts, such as pubs, the Valuation office (VO) will be considering three years’ accounts leading up to 1st April 2015, so the 2014 summer will be very influential in the 2017 revaluation.

The VO have already started issuing ‘forms of return’, which request confirmation of lease terms and rents paid, or trading accounts for those properties valued on this basis.

March 2015 will also see the end of the ‘transitional relief’ arrangements under the 2010 list which phased in the increase as it changes from the 2005 to the 2010 list.

Cannock Chase Council to save on business rates by sharing buildings.

Council chiefs are looking at ways to make savings on a forecasted deficit of £578,000 in 2017/18.

Over the next four years the council will look at sharing buildings to pull in funds to reduce the potential shortfall.

Rather than axe services and jobs the authority will be sharing some services with Stafford Borough Council, for example in human resources and IT as well as making greater use of its council’s offices in Beecroft Road.

The building was also being shared with staff from the NHS, clinical commissioning group and Staffordshire County Council.

Posted on: 25/11/2014