Rates bills rise in line with inflation and are based on the CPI figure for the previous September. Furthermore, with CPI announced at 6.7% for August, it is anticipated that the CPI figures for September 2023 will be around 6%. Consequently, the total tax take from this tax is projected to increase from approximately £26bn in 2023/4 to £27.56bn in 2024/5 from next April.
However, there is a possibility that the government may intervene and freeze the business rates multiplier.
Last year, chancellor Jeremy Hunt froze the multiplier for the current tax year, mainting it at 51.2p for every £1 of a commercial property’s rateable value, and 49.9p for small businesses.
In preparation for the upcoming Autumn Statement, forty-four major British retailers have already written to the chancellor, urging him to freeze the multiplier again. They estimate that failure to do so could result in an additional £400m being added to retailers’ cost base next year, particularly as Covid-related reliefs come to an end.
According to Webber, such rises in rates bills are unsustainable. He emphasizes that all sectors are already grappling with increased costs, whether it be from higher wages, materials, or energy expenses. Adding the burden of higher occupation costs could potentially stifle expansion and growth plans for many businesses, causing detrimental effects. Webber believes that the government must take action by freezing the multiplier for 2024/5. However, he also acknowledges that this would only provide a temporary solution. Ultimately, proper business rates reform is necessary.
Webber has consistently advocated for business reform and criticized successive governments for their failure to address the issue effectively. He asserts that the current system, which provides £32bn gross (£26bn net) for local authority funding, is unsustainable in its current form. The main concerns revolve around rate bills being overly high and increasingly unaffordable for businesses.
To address these challenges, Colliers has formulated a manifesto for reform. The key components of this manifesto are as follows:
1. The government should rebase the Multiplier to a level that businesses can afford, such as 34p in the £. A lower and fairer Uniform Business Rate (UBR) would reduce barriers to entry, encourage expansion and innovation, and foster growth. It would also broaden the tax base, discourage tax avoidance, and help minimize any revenue gaps caused by a lower UBR.
2. Reform the current system of relief mechanisms. By basing the multiplier on an affordable level, the complexities associated with numerous reliefs can be simplified and resolved, as fewer businesses would need to claim them. Colliers suggests that everyone benefiting from public utilities and local services should contribute, but at a fair rate. A starting point could be a rate of 10 or 15% for smaller businesses. Additionally, Colliers recommends that reliefs be reviewed at least every three years.
3. Implement annual revaluations. While transitioning from five-yearly to three-yearly revaluations is a step in the right direction, Colliers believes that annual revaluations would be more effective. This approach would ensure that business rates bills accurately reflect market fluctuations, enabling occupiers to immediately benefit from adjustments to rateable values.
4. Reform the appeal system and demand transparency from the Valuation Office Agency (VOA). The current system makes it excessively challenging for businesses to assess the fairness of their assessments or appeal them. Recent modifications to the Check, Challenge, Appeal (CCA) process have only added confusion, whereas requesting ratepayers to provide annual information has placed a significant administrative burden. Colliers urges for a more accessible and transparent appeal system, with appeals being resolved within a 12-month timeframe.
Colliers firmly believes that the current system needs to be transparent, easily accessible to all, and capable of resolving appeals efficiently. By achieving these goals, businesses can focus on their core operations and thrive.
Webber adds, “In its 2019 Manifesto, the Conservative Party pledged to reduce business rates by conducting a fundamental review of the system, aiming to alleviate the tax burden on businesses. However, with projected rises of over £1.5 billion next year, it is evident that this promise has not been fulfilled. We urge the Chancellor to make a statement and take action promptly.”
