Viewpoint - 07/10/2013

Rates bills soon to outstrip council tax

In 2015, for the first time in a decade, government income from business rates will exceed council tax collections; unrepresented occupiers will soon be paying more to the Exchequer than those with the right to elect their government.

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While this may just be the latest in a long list of statistics which cause business owners to resent the business taxation regime, it may also represent the moment when the business community stands up to be counted.

Resentment bubbling to the surface

Beyond the pain of actually paying tax, one of the most enduring concerns of business leaders is the increasingly unrepresentative nature of business rates. In today’s economic environment, rate demands are often greater than rent, valuations may be based upon five year old rental values. Those businesses least able to pay often suffer the largest increases and too many ratepayers simply cannot fathom the logic behind their valuations.

In the short-to-mid-term, wholesale change is unlikely. From the Treasury’s perspective, the taxation of physical property makes responsibility for payment and the physical collection of the tax a relatively simple task. Notwithstanding concerns regarding the rise of ‘property-lite’ internet businesses, the business rate in its current guise is here to stay for the foreseeable future.

Pragmatic action required

The rating system would benefit from a number of changes to make it more palatable, assist economic growth and encourage regeneration:

  1. Reverse the decision to delay the revaluation until 2017: There is deep suspicion that the assumptions used by the government to support its argument for delay were intentionally self-fulfilling. In the meantime, thousands of perfectly viable businesses teeter on the brink.
  2. Annual rolling revaluations: The technology exists to enable annual rolling revaluations, thereby de-mystifying the process for many occupiers and allowing rateable values to keep pace with changes in the economy.
  3. Rating self-assessment: Empower businesses to assess their own Rateable Values, subject to Valuation Office appeal, statutory deadlines and remedies for failure to comply.
  4. Fixed multiplier increase: Facilitate predictability by replacing the annual index-linked UBR increase with a standard multiplier, fixed for five years.
  5. Empty Property Rate: Abolish empty rate charges as they inhibit new development.
  6. Flat business rate: A low flat rate tax for small businesses, similar to the VAT flat rate scheme, would remove the need to assess small properties for rating and facilitate significant reductions in government administration costs.

Pragmatic actions to seduce ratepayers

The proposed changes are not insignificant. But, they are pragmatic, achievable and will go a long way towards simplifying the system. They will also reduce costs and ensure that business ratepayers achieve representation. 


This article is part of the autumn 2013 edition of Rating in Brief.

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