Government urged to act on business rates now to avoid £1.5bn being added to bills

Businesses will pay an extra £1.56bn in property bills from next year unless the chancellor freezes business rates again, Colliers International has warned.

Jeremy Hunt announced last year a support package worth £13.6bn to help businesses still recovering from the Covid pandemic. It included freezing business rates, which usually increase annually, as well as increasing the discount for retail, hospitality and leisure businesses from 50% to 75% for 12 months, capped at £110,000 per company.

Business rates are due to increase again next April, however, under the government’s “multiplier”, which is pegged to inflation in September as measured by the consumer price index (CPI).

Based on estimates that CPI will be about 6% for September, from 6.7% in August, analysis by Colliers International forecasts that business rates bills will increase from £26b in 2023-24 to £27.56bn in 2024-25.

Last year, Hunt froze the multiplier for the current tax year, keeping it at 51.2p for every £1 of a commercial property’s rateable value, and 49.9p for small businesses.

Some 44 major British retailers have already written to the chancellor ahead of his Autumn Statement, urging him to do the same again, otherwise they estimate an extra £400m will be added to the retailers cost base next year, particularly as Covid related reliefs come to an end.

However, John Webber, head of business rates at Colliers International, said retail is not the only sector to be adversely affected by such rises.

He points out that the logistics/manufacturing sector now pays 26% of the total business rates tax bill and has seen steep rises in its rates bills, as a result of the 2023 Revaluation, while the offices sector is expected to face an extra £354m in its total rates bill.

According to Webber such rises are unsustainable.

He said: “All sectors are suffering from increased costs, whether from increased wage bills, materials or energy costs. They cannot cope with the hike in rates bills too. Higher occupation costs will only dampen expansion and growth plans and for many businesses might be the last straw. The government must do something. Freezing the multiplier for 2024/5 is the first step, but only really papers over the issues. Ultimately, we need proper business rates reform.”

Webber has been an ardent campaigner for business reform and critical of successive governments that have totally failed to grab the nettle and just tinkered around the system or put it in the “too difficult box”.

He believes the current system which provides £32billion gross (£26 billion net) for local authority funding is just unsustainable in current form, with the main issues being that rate bills are just too high and increasingly unaffordable for many businesses.

Colliers has drawn up a manifesto for reform, the main components of which are:

+ The government should rebase the Multiplier to a level that businesses can afford– to say 34p in the £.  A lower fairer UBR would reduce the barriers to entry, help expansion and innovation for businesses and encourage growth. It would broaden the tax base, disincentivise tax avoidance and help reduce any gaps in revenue for the Exchequer caused by a lower UBR.

+ Reform the sticking plaster reliefs system.  Re-basing the multiplier to something affordable will mean that the whole question of the myriad of reliefs can become simplified and resolved, as not so many businesses will need to claim them. Everyone that benefits from public utilities and local services needs to pay something- but at a fair rate, maybe starting at 10 or 15% for the smaller businesses.  Colliers believes reliefs should be reviewed at least every 3 years.

+ Introduce annual revaluations. The Government has moved from five-yearly revaluations to three-yearly revaluations, which is a step in the right direction, but in Colliers’ view is not far enough. By implementing annual revaluations, business rates bills will accurately reflect the dynamic movements of the market and allow occupiers to benefit immediately from adjustments to rateable values.

+ Reform the appeal system and demand transparency from the VOA.  The current system makes it too hard for businesses to either access the fairness of their assessments or to appeal them. Recent tinkering with (CCA) has only added to the confusion and the request for the annual provision of information from the ratepayer has also added a significant administrative burden.

Colliers believes the current system needs to transparent, easy to access for all and allow appeals to be resolved in 12 months, so that businesses can get on with what they do best- running their businesses.

Webber continued, “In its 2019 Manifesto, the Conservative Party promised, “To cut the burden of tax on business by reducing business rates. This will be done via a fundamental review of the system.“ With rises of over £1.5 billion looming next year, it clearly has not fulfilled this promise. We urge the Chancellor to make a statement and to do it soon.”



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