During five years of the coalition government, voices calling for improvements to the business rates system were loud and clear.
The coalition’s response was to drive three consultation initiatives - but, as many of our clients tell us, what businesses (and SMEs most of all) want to see is tangible action.
That urgency from occupiers for improvement was prompted by the perfect storm of a postponed revaluation combined with major movements in rents, which has caused a lot of people a lot of pain.
Business rates are not some minor tax issue. They generate around £28bn (4%) of annual income for the government and affect the economic performance, profitability and viability of businesses. Our new Conservative government must deliver credible reform and improvement if it is to retain any confidence that it is genuinely pro-business.
The Conservatives have said they will eliminate the budget deficit by 2018, avoiding increases in income tax, National Insurance and VAT. They have also committed to a reduction in departmental spending, further tax cuts and an additional £8bn in funding for the NHS. The chancellor has limited room for manoeuvre. That’s why addressing the problems with business rates is even more important. Appropriate reform will empower businesses to be more productive and generate the economic activity, growth and tax take on which the Conservatives are depending.
Crucially, the chancellor needs to enact reform that shifts the culture around business rates. Greater efficiency, transparency and fairness must be central and a reversal from the current burden of responsibility sitting with the taxpayer to instead rest with the Valuation Office Agency (VOA) is equally essential. We need to move towards a system where the VOA does more to disclose and substantiate the calculations by which an occupier’s business rates bill has been arrived and away from the opaque and adversarial system we have at present.
Based on what our clients are telling us, the chancellor also needs to:
- Bring UK firms greater transparency and better access to the evidence behind their tax bill;
- Take business rates into the 21st century through the best use of digital technology;
- Support the smallest firms by removing them from business rates altogether;
- Retain a five-year cycle of revaluation and a property-based assessment method that gives certainty and predictability and allows businesses to budget and plan;
- Adequately resource and invest in the VOA.
Talk is good but ultimately it’s what you do that counts. Our message to the chancellor is similar. Listen, address concerns and think first but act decisively.
Businesses will soon have had seven years of a system widely acknowledged to have under-performed and constrained economic activity in many sectors and parts of the country. That’s a long time. That’s why we, at CVS, are calling for the chancellor to show his pro-business ‘stripes’ and strengthen the business rates system. His summer budget, on 8 July, would be a good place to start.
Mark Rigby, chief executive, CVS