020 8429 9245

April 2nd 2014 / BY: Wisteria

Is The Business Rates System Outdated?

With roughly 50,000 vacant shops in the UK high streets and a growing north-south divide of empty shops, the British Retail Consortium (BRC) believes business rates should be revised now to help high streets recover.

Closing time for the high street?

Retailers are calling for a radical overhaul of the business rates system which proposes rates are based on factors such as energy use, job creation and corporation tax, rather than property values.


The BRC dubs the current system, “outdated and cumbersome”¹ and highlights that rates are based on 2008 valuations, before the financial crisis had fully hit and when the cost of renting a shop or an office was often higher than now. The BRC also attributes the rise of online shopping as a significant factor in rendering the current system out of touch with today’s businesses.

Due to the outdated basis of the system, business groups have continued to complain that the rates system discourages investment and requires modernising.

The BRC have suggested offering a discount in rates to businesses who pay corporation tax. Whilst the director of the BRC, Helen Dickinson says this suggestion was not intended to target online stores, it could have an impact on multinational online retailers such as Amazon who avoid paying their full amount of corporation tax.

Plans to be purchased?

The plans created by BRC and accountants Ernst and Young have been criticised, suggesting that these proposals would actually harm small retailers and manufacturers. Rates based on the number of people you employ would only benefit larger businesses, whilst rates based on low energy rates would unfairly rule out discounts for manufacturing industries. Such energy intensive industries would suffer disproportionately.

Before the BRC’s proposals, the government announced at the Autumn Statement 2013, over 1bn of business rates support, which will benefit 1.8 million rate payers.

Decent discounts?

In December 2013, Chancellor George Osborne made a further promise to businesses, planning to offer small businesses £1,000 discount on their business rates and a cap of 2% on further rate increases. Despite these concessions, Britain’s high street may need a better bargain from the government to boost its recovery; 46 per cent of small business owners list rates as a continuing burden².

What would effect would the BRC‘s revision of business rates have on your business? Would they pump prosperity or problems into our high street?

 


¹ http://www.bbc.co.uk/news/business-26236385
² http://realbusiness.co.uk/article/25606-we-need-thorough-reform-of-business-rates-but-an-energy-tax-isnt-the-answer-