Tim Attridge, Head of retail rating at property firm CBRE.
Last week the Business, Innovation and Skills Committee added its voice to the growing debate on the UK’s business rates system, which seems to be regarded as a disproportionate burden on retailers.
The amount a retailer pays in business rates liability is linked to the rental value of its property.
A large part of the problem is that the last business rates revaluation took place in 2008 when retail rents were close to their peak. As a result, many retailers pay more in business rates than they do in rent. The Government has made a bad situation worse by postponing the scheduled 2015 revaluation until 2017, a decision the committee criticised in its report last week.
In the past few weeks several alternative systems have been proposed. In February the British Retail Consortium suggested business rates could be based on energy consumption rather than rental values. The BIS Committee report called for a tax based on sales or turnover, or even a separate tax system for retail. Retailers require a fair, transparent system, but the Government will not introduce reform that reduces the level of tax.
These objectives can be achieved from a tax based on property values. Regular revaluations will reflect current market conditions. Should a sector or area suffer economic hardship, reliefs could be applied.
In the meantime, the system for appeals should be simplified, with the HMRC’s Valuation Office providing detailed evidence to substantiate valuations. This could happen in October but there are questions around the level of detail to be provided.
Furthermore, the system looks likely to become more onerous for retailers, with the Valuation Office asking for evidence to substantiate the appeal at the outset. This will undoubtedly result in debate over an appeal’s validity.
If rates reflect what is happening in the real world, if the valuations are clear and can be substantiated and if the method of appeal is simple, then retailers can focus more on retail and less on tax. If that happens we’ll all benefit.