The Retailer Spring_09.05_FA

#reinventionretail

NEWS FROM THE BRC Business Rates – the need for reform

Dominic Curran Property Policy Adviser British Retail Consortium

The issue of Business Rates has rocketed up retailers’ agendas in recent years. As industry transformation gathers momentum, with reduced margins, changing consumer habits and increased uncertainty, the Business Rates burden is increasingly onerous and unsustainable. In England the multiplier (the formula by which a business property’s rateable value is calculated) has now topped 50p in the pound, up from 40p a decade ago, joining Scotland and Wales in what must be the UK’s least desirable over 50s club. Notwithstanding lobbying successes by the British Retail Consortium (BRC) to mitigate the Business Rates impact on retailers in recent years, the sector is still particularly hard hit by the tax. Retail constitutes 5% of the economy, yet pays 10% of all business taxes, and 25% of all Business Rates. For the largest retailers, Business Rates are almost 50% of their total tax bill. Recent reforms, such as reliefs for small businesses and linking the multiplier’s increase to the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI), are welcome victories for many retailers, but they do not remotely address the underlying problem. Only 10% of retail ratepayers have rateable values above the small business relief’s qualifying £51,000 threshold, yet they pay almost 70% of the sector’s rates bill. And an increase linked to CPI is still an increase. Some have suggested an online sales tax (OST) could offset the rates burden. The BRC opposes any new taxation on the sector. An OST would most likely almost entirely fall on retailers (although the individual impact would depend on each retailer’s proportion of turnover generated online) but, even if it directly funded a corresponding cut in Business Rates (a very big ‘if’), retailers would only receive 25% of the benefit (i.e. the proportion of Business Rates they account for). Asking retail to fully bear a tax in order to create a benefit three-quarters of which would go to other parts of the economy would seem a perverse way to help the sector. It is because of the retail rates squeeze that the BRC strongly welcomed the Treasury Select Committee’s Inquiry into their impact. This is a direct response to the pressure we continue to bring to bear on behalf of the industry. The BRC’s submission made a series of recommendations for review, relief and reform of the system. Most importantly, the BRC believes that an Independent Review of Business Taxation should be undertaken to ensure that we have a system fit for the 21st century. It must consider everything from VAT to Corporation Tax, Business Rates and potentially other taxes not currently levied, such as Land Value Taxation, to ensure that we move to a system that is fair, coherent, and supports economic growth and competition.

Notwithstanding this review, the BRC’s response recommended more immediate relief and reform of the existing system. Most urgently, a freeze in the multiplier, pending further reforms, is required to guarantee that the cost burden will not rise any more than is already has done. Downwards phasing must also be abolished. This requires ratepayers who should be paying less following the 2017 revaluation to have their bill reduction staggered over four years in order to fund a similarly staggered rate increase for those whose rateable values have risen. Limits to rates increases should be funded centrally, and not by other ratepayers. Additionally, Business Rates is the only tax where legislation requires a broadly fixed sum to be raised annually, and then a tax is constructed to achieve this. This unique anachronism must end, and Treasury should set a tax rate, not a sum to be raised. The BRC also recommended an Improvement Relief. This would provide relief from increases in rateable value for three years created as a result of property improvements by tenants, incentivising such improvements, justifying the investment, and improving the quality of retail units. This would benefit tenants, customers and landlords. The Valuation Office Agency must be reformed. Its new appeal process, ‘Check, Challenge, Appeal,’ is widely held to be cumber- some, labour intensive and a major impediment to reaching accurate property valuations. The Agency must invest in upgraded practices, IT and staff if it is to be fit for the present, let alone the future. Further reform should see the Treasury treating Corporation Tax and Business Rates as a sole ‘Business Tax’, using the forecast increase in proceeds from the former to offset the rise of, and fund a further reduction in, the latter. Increased tax revenue from business growth should be used to lighten commercial property taxation, supporting further business growth, creating a virtuous economic circle. This would be an interim measure towards the BRC’s final recommendation, which calls on the Treasury to commit to a longer-term multiplier rate of 34p in the pound, and to publish a roadmap setting out how it intends to get there. Business Rates and business taxation are in urgent need of far reaching reform. The BRCwill continue to lead the charge for a fair and proportionate tax system that supports jobs and high streets, and these recommendations set out a process for Government to get there.

14 | spring 2019 | the retailer

Made with FlippingBook - Online catalogs