The Confederation of British Industry (CBI) and various firms have called upon the government to overhaul the ‘antiquated’ business rates system, which they believe is inhibiting productivity and economic growth.
A panel of representatives from the retail and manufacturing sectors convened to formulate proposals aimed at improving the current business rates system. The overarching goal is to stimulate investment and boost the economy. The CBI’s chief executive, Rain Newton-Smith, emphasised the urgency of this reform, stating, “It’s time to fix the antiquated business tax system once and for all, seizing the chance to boost investment and grow the economy.”
The call for reform comes ahead of an autumn Budget, where significant tax hikes and reductions in public spending are anticipated. Companies have criticised the current system for being overly complicated, unpredictable, and unjust. While the Labour Party has committed to reforming business rates, it insists that the overall revenue must remain unchanged, a stance the CBI argues makes comprehensive reform almost impossible.
The CBI highlights the necessity for a fair and balanced approach, advocating for the abandonment of the revenue neutrality principle. They stress the need for a transition from current regulations to long-term change and call for immediate support for adversely affected sectors, as well as a detailed long-term strategy in the forthcoming fiscal statement. Among the recommendations are the adoption of a ‘banded’ system similar to income tax, the removal of abrupt increases, and the introduction of annual revaluations.
The CBI’s proposals also include a 120 per cent green super deduction for retrofitting, enhanced improvement relief, simplified exemptions, the review of current reliefs, and the exclusion of public buildings such as those used by the NHS from the system. Additional suggestions involve improving transparency within the Valuation Office Agency (VOA), delaying notifications of property changes, and requiring justifications for any alterations in valuation methodology. “Businesses want a system built on certainty, simplicity, competitiveness, transparency, and fairness,” said Newton-Smith, emphasising that the CBI “stands ready” to assist the government. “Firms have wholly welcomed the government’s commitment to reform business rates. But the insistence on revenue-neutrality is misplaced.”
Dan Foxton, Director of Estates at Asda, commented on the impact of current business rates, stating, “Business rates are one of the most significant costs for Asda. The current business rates system is an obvious inhibitor to growth.” Similarly, Tim Beattie, head of UK rating at JLL, supported the reforms, noting, “These reforms address key business concerns and promote fairer, more predictable taxation. If implemented, these proposals would be a crucial step towards creating a more equitable and dynamic business environment.”
The Treasury has yet to respond to requests for comment on these proposed reforms.
The call for reforming the business rates system is gaining momentum, with the CBI and various firms highlighting its critical importance for enhancing productivity and economic growth. The upcoming fiscal statement could play a pivotal role in determining the future of the UK’s business environment.