The government intends to address the issue of sudden jumps in business rates known as ‘cliff-edges’ as part of its overhaul of the current system.
In a business rates interim report, the government said it would review how small business rates relief (SBBR) can support business growth and it would also consider other ways to improve support for businesses that invest in their premises and to make the business rates system easier to engage with.
The government said it would be conducting further engagement with stakeholders about these options to improve the business rates system and would provide a further update at the November Budget.
Rachel Reeves, chancellor of the exchequer, said: “Our economy isn’t broken, but it does feel stuck. That’s why growth is our number one mission. We want to see thriving high streets and small businesses investing in their future, not held back by outdated rules or strangled by red tape. Tax reforms such as tackling cliff-edges in business rates and making reliefs fairer are vital to driving growth. We want to help small businesses expand to new premises and building an economy that works for, and rewards working people.”
In response to the news, Kate Nicholls, chair of UKHospitality, said: “For too long, the broken business rates system has unfairly punished hospitality businesses and I’m pleased that the government is taking action to reform it. These measures to remove punitive cliff-edges and barriers to investment are positive and will help to rebalance the system, as will the government’s commitment to lower business rates bills for hospitality businesses.”
Shirine Khoury-Haq, Co-op Group CEO, added: “Small, local shops are the lifeblood of communities. Today’s announcement on business rates reform is a welcome step forward, and we fully support the changes which will enable small and medium sized retail, hospitality and leisure businesses to invest, drive growth, and better serve their local communities. We welcome plans to enhance Small Business Rates relief because of the value this will provide to the thousands of local stores which we wholesale to, and we have long said that businesses should be incentivised rather than penalised for investing in their stores.
“Most importantly, these reforms are vital because they will benefit 98% of shops across England which make up the backbone of high streets and shopping parades, playing a crucial role in local economies and local communities. They create jobs, foster connections, and build resilience. To succeed, these reforms must now be backed in the Autumn Budget, with the multipliers set to deliver a fairer system that protects smaller, community-focused retailers.”
Louise Hellem, CBI chief economist, said: “The CBI welcomes this interim report as a significant step forward in the long-awaited reform of the business rates system. The government is right to prioritise tackling cliff-edges, which have long acted as a brake on investment and growth across the economy. We particularly welcome both the commitment to explore a slice-based system and options for improving investment incentives – such as enhancing improvement relief as put forward by CBI members. It’s also encouraging to see the emphasis on improving rates administration, building on the merger of the Valuation Office Agency with HMRC, which could make the system more accessible and efficient for business.”
John Webber, head of business rates at Colliers, added: “Yet again the government is tinkering around the edges and rearranging the deck chairs on the Titanic. Whilst we welcome the acknowledgement we will be seeing a transitional relief scheme following the revaluation, there was nothing in this statement that looked like the government is properly grasping the issues that businesses are facing. Business rates in current form as a tax are just too high and there seems no real commitment to reduce them.
“The statement mentioned the new multipliers but we – and maybe they – still don’t know what they will be until the Budget, at the end of November. For those businesses facing the higher multiplier, which could be over 60p in the £, this just leads to uncertainty and an inability to budget and plan ahead. And that includes the bigger retail and hospitality businesses, the mainstay of the high street. And ‘slab to slicing’ ‘reforms’ only makes an already complicated system more complicated.
“What we need is a commitment and timeframe to reducing this tax to a fair rate of around 35p in the £, something businesses can afford, and to do this across the board. Only then will we encourage investment and growth and do something towards ‘saving the high street’.”
