October 13th, 2014. Ben Lloyd
Is an Overhaul of Business Rates Needed?
Many of the UK’s top companies are claiming there needs to be a huge overhaul of business rates. But why is this and what could it do for the UK’s economy?
An Overhaul of Business Rates
In September more than 100 companies, including the likes of Tesco, Boots and Marks & Spencer, signed an open letter published in the Daily Telegraph, which addressed the ‘critical problem’ that is business rates. These companies claim that business rates are ‘no longer fit for purpose for the 21st century’ and if updated could ‘unleash investment’ in the country.
As well as some of the UK’s largest retailers, other signatories include manufacturers, leisure facility providers and property companies.
The Letter Read:
As the Daily Telegraph has consistently pointed out, the current system of business rates is no longer fit for purpose for the 21st Century. Business rates are higher than property taxes anywhere else in Europe and are the second highest in the OECD. This is a critical problem for all of British business.
A recent survey demonstrated that 93% of MPs agree that the fundamental reform of business rates would revitalise our high streets and town centres. Manufacturers, retailers, the hospitality trade, property, service industries and businesses large and small are all held back by business rates.
A modern, sustainable and transparent system would unleash investment that could bring skilled and entry level jobs and new and expanded businesses into our local communities.
Those who seek a competitive tax regime as a draw for investment and jobs, should apply that logic to business rates.
It is no longer an option to say that reform is too difficult or complicated and we call on all political parties to commit to fundamental reform in their manifestos for the next General Election.
So What’s the Problem?
Business rates currently amount to £25billion of the annual treasury, but businesses claim that this is not reflective of the economy and that it is preventing further expansion and innovation.
George Osborne, the Chancellor of the Exchequer and Second Lord of the Treasury, has said he will review this by 2017, but is this enough?
The UK’s business rates are the highest property taxes in Europe, a key factor in the request for reform before the next general election. These are calculated using property valuations and the annual rate of inflation, and are meant to be revaluated every 5 years. The last one, due in 2013, has been postponed indefinitely, leaving businesses with rates calculated in 2008 at the height of the property boom.
Many businesses have now begun to appeal their rate charges in order to take the issue into their own hands. It is estimated that The Department of Communities and Local Government (DCLG) will pay out £4.2billion between 2010 and 2015 from these appeals, which indicates the inaccuracies of the current rates.
Is an Overhaul of Business Rates Needed?
Well, that’s for you to decide, but an inquiry into this cannot hurt. And if business rates do get lowered it will free up business capital to spend elsewhere. You could have that refurbishment you’ve been planning or give your staff a pay rise. But let’s not get carried away, watch this space for any updates to see if an overhaul is granted.
Article By Ben Lloyd
October 13th, 2014
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben