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Business Rates Review – What Again?

We considered a government review of business rates in our newsletter of April 2015. Views were sort at that stage from all interested parties. However, a further call for evidence was made by the Treasury in July 2020 after the terms of reference for a fundamental review were published in the 2020 Budget. Consultation closed at the end of October 2020. The government is to produce its conclusions in the spring of 2021. They are awaited with interest.

The present system has a long history. It is based on the letting value of a property occupied for business purposes multiplied by a rates multiplier in England and Wales and by a poundage rate in Scotland. Reviews of the letting value are conducted, generally speaking, on a five year review pattern. The next review was to be conducted in 2022 but was to be brought forward to 2021 until the coronavirus disaster occurred. The review will now be conducted in 2023 but will be based on 2021 valuations. Liability for the tax falls on the occupier with the owner responsible for empty properties.

In its 2020 publication, the Treasury reports that “Previous reviews have reflected a consensus that business rates have distinct strengths as a tax.” However, the government recognises that concerns remain about the level of rates levied, the wider functioning of the system and its impact on businesses. The present review will, therefore, be wide ranging and will explore the pros and cons of alternatives to the business rates.

One area of concern is the number of reliefs available. To quote from the Government’s review issued by HM Treasury “Several stakeholders, including the Treasury Select Committee, have suggested that the number of business rates reliefs available is evidence that the system is ‘broken’.” Whilst the Government has said it does not agree with this assessment, it is aware of concerns about the complexity of reliefs. Concerns, too, have been expressed about how the rates multiplier or poundage is set. Should this be based on a geographical basis or perhaps the property type with differing multipliers for retail, offices and warehouses? Again, we await the government’s conclusions: watch this space although with Covid-19 and Brexit, the government has a lot on its plate at present.

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