With one day to go until the Chancellor gives his Budget, Neil Stockham, retail tax partner at BDO, assesses what can be done to reform Business Rates – a current bone of contention with business and media.
The persistent issue of business rates continues to be a source of controversial and passionate debate in the run up to the Budget.
Although the Chancellor has said “he’s alive” to the impact the proposed changes will have from 1 April, there is still significant concern among high street retailers as they remain uncertain about whether the Budget will provide any relief to alleviate the steep increases they face next month.
A self-assessment system whereby businesses would estimate the rental value of their own property, a transitional fund of £3.6bn to help businesses facing big rates hikes and a three-year “holiday” for new firms setting up have all been muted as possible options for Hammond to consider.
I would call on the Chancellor to commit to a full overhaul of the business rates system; one that seeks to level the playing field for traditional and online retailers and creates an environment that encourages mid-sized entrepreneurial retailers to invest for future growth.
This should include removing investments made by businesses out of the calculation for valuing properties. He should also remove the link with annual RPI inflation and instead index to CPI, allowing business rates to flex more closely with the economy.
In the longer term, I wouldn’t be surprised to see the Government introduce some form of low tax on the ‘digital real estate’ of large online retailers. For now, however, it’s crucial that policymakers grasp the full extent of next month’s increases and acknowledge, in particular, that high street retailers have to contend with this on top of rising import prices, increasing employment costs and a consumer with tightened purse strings.
Neil Stockham is a retail tax partner at BDO.