Business rates experts at Colliers call the Chancellor to “right the wrongs” of the 2023 Autumn Statement and cancel the business rates increases planned for April.
The Chancellor must cancel the business rates rises due in April for all businesses when he announces his Spring Budget, or the High Street will be put under even greater threat than it is already.” says John Webber, Head of Business Rates at Colliers.
“If the Chancellor does not take action to reduce this rates burden, we will see more retail chains going into administration. Retail, Leisure and Hospitality Relief may have provided a temporary reprieve to the small shopkeeper or independent restaurant but gives no help to the big retail and leisure chains who are the anchor tenants in so many town centres and retail spaces and provide the opportunities for jobs.”
Webber therefore urges the Chancellor to:
Cancel the planned business rates increase in April- by reversing the decision made In November, when he increased the standard multiplier using the September rate of inflation figure of 6.7p, particularly as inflation now stands at 4%. The Chancellor did freeze the small business rate multiplier and bring in the retail, hospitality and leisure relief for small companies, but larger companies will still see their rates bills rise in line with the multiplier which will increase from 51.2p to 54.6p in the pound.
This will impact 220,000 businesses who will pay an extra burden of £1.66bn in tax from April 1, 2024. Colliers has estimated that the businesses in the retail/ leisure sector will pay over £360 million more in business rates, the offices sector around £400 million more and logistic/ industrial sector around £450 million more as a result of the increased multiplier.
Larger companies already pay more than 75% of the business rates burden and this rise will be a massive hit to UK plc as well as a disaster for the larger retailers who will pass the costs of this rise onto the consumer. It will be a huge hit to the high street where the sector is already under enormous pressure. Such rates rises will therefore dampen economic expansion and growth across the economy.
Announce a plan to reduce the multiplier-The multiplier (the UBR used to calculate rate bills) should be reduced across the board. Business rates are not linked to performance and property occupiers must pay them before they have earned a penny of income. At 49.9p and 51.2p (soon to be 54.6p) for small and large businesses respectively, business rates are unacceptably high compared to the rate of 34p when they were introduced in 1990. We believe they should be rebased to a fairer level that everyone can afford to pay.
The Chancellor therefore could restore investor confidence by announcing a long-term plan to reduce the multiplier to 34p.
No other European country charges businesses half the rental value of their premises in property tax and at such a high rate, business rates are a significant deterrence to new investment in the UK. By reducing the UBR, the Government would encourage investment, expansion and innovation.
Renew Reliefs- Reducing the multiplier to an affordable level would preclude the need for many of the complicated reliefs most of which have been made necessary by the unaffordable level of the tax and to stave off disaster in the short term.
These reliefs have led to business rates deserts whereby 700,000 property occupiers out of 2.1 million pay no business rates all. Everyone that benefits from local public services should contribute to their maintenance but at a fair rate. Reliefs should also be reviewed every three years as a minimum to ensure they do not outlive their purpose.
Extend retail, hospitality and leisure relief until the next revaluation in 2026. - The Chancellor’s extension of the 75% retail, hospitality and leisure relief was a welcome one and helps many beneficiaries in the short term. However, the temporary nature of the relief requires an annual review which leaves many businesses unable to plan for more than a year in the future. No pub, restaurant, café or small shop can realistically plan for the future if they are peering over the cliff edge of a 75% increase in their rates bill next year. The Chancellor should give them some confidence by confirming that the relief will be in place until at least until the next revaluation in 2026.
Extend Empty Property Rates Relief to Twelve Months and to Other Sectors . The Government should accept that the significant amount of long term empty commercial property in England is due to a lack of market demand and long-term socio-economic factors, not because the landlord wants to keep premises empty.
The current empty property relief period is too short. Many property owners take up to 12 months to find an appropriate tenant for their properties. The Chancellor should therefore extend the three- and six-month empty rates holidays to twelve months for all property types including the offices and retail sectors too.
Round up the cowboys.- Business rates advisors are among the only providers of financial advice that do not need a license to practice. Smaller businesses in particular fall victim to cowboy rating advisors because the system is too complicated to understand without professional help. Rogue agents often take upfront payments with the promise of lowering rates bills, before disappearing with their fees. The new Duty to Notify in the Non-Domestic Rating Act 2023 will only exacerbate the problem as many small businesses that did not previously have to engage with the system will have to update the VOA concerning any changes to their property.
The Government needs to protect small businesses by launching a consultation into rogue rating advisors’ practices and how they can be addressed. We would favour the establishment of a register of professional rating advisers.
Webber conclude: “The Conservatives won the General Election in 2019 promising genuine reform of business rates and to “cut the burden of tax by reducing business rates.” So far it has spectacularly failed its election pledge. Instead, we have a system that hinders businesses from expanding and deters prospective investors from overseas avoiding making new investment here in the UK because the business rates burden is so high.”
“A tired Government and work from home “group think” civil servants have resulted in the burden of business rates continuing to climb – this Government is in the last chance saloon – let’s hope they do the right thing after all, even if it is 14 years too late!“
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