Budget 2023 – the government needs to cut business rates and introduce reform

The chancellor must not miss the opportunity in Budget 2023 for fundamental business rates reform. True, in last year’s Autumn Statement some concessions were granted – to freeze the Multiplier and abolish downwards transition in the next revaluation – but these measures were the just tip of the iceberg and merely put a sticking plaster on a gaping wound.

We believe the chancellor needs to tackle the fundamental flaws in his Budget tomorrow and should take the following nine steps:

• Reduce the Multiplier (the UBR used to calculate rate bills) to a sustainable level of around 34p in the £. At current levels, this is the first time a new list has started with a multiplier over 50p which means as time moves on and the multiplier rises with inflation this figure will continue to increase and businesses will receive bills they can’t afford. A lower UBR would reduce the barriers to entry, expansion and innovation for businesses and encourage growth.
• Extend retail reliefs post 2024. The extension of business rates relief for retail and hospitality premises from 50% to 75% in 2023-4 is welcome, but the OBR envisages that this relief will be removed from 1 April 2024, leaving such retailers with a massive tax hike at that point. We call for a tapering scheme to be applied at the least.
• Reform of the sticking plaster reliefs system and remove business rates deserts. Re-basing the multiplier to something affordable will mean that the whole question of reliefs can become simplified and resolved, as not so many businesses will need to claim them. We believe reliefs should be reviewed at least every three years.
• Extend empty property rates relief to 12 months and extend to include retail and offices.
• Introduce annual revaluations.
• Review plant and machinery. All plant that is an integral part of the trade process should be exempted from business rates as should be investment in new technology that make businesses more green/ sustainable.
• Improve transparency from the VOA and request the VOA shares the evidence that it uses to form the basis of its valuations enabling ratepayers to avoid the ‘check challenge appeal’ system (CCA), a lengthy and costly process for the occupier.
• Reform unfriendly and ill-equipped appeal system. The current system makes it so hard for businesses to appeal their assessments. Only those companies that can afford professional advisors get to the right answer. The system should be transparent, easy to access for all and allow appeals to be resolved in 12 months.
• Address rogue rating advisors by regulating the ratings industry. We believe the issue of rogue traders will only get worse when the government introduces annual returns and imposes ‘the duty to notify’ since this will put extra administrative burdens on rate payers who will be vulnerable to even more ‘help’ to negotiate the system.

So, what we still need is a well-managed and transparent business rates system, that encourages rather than punishes businesses. In its 2019 Manifesto, the Conservative Party promised “To cut the burden of tax on business by reducing business rates. This will be done via a fundamental review of the system”.

So far this has not been fulfilled. Far from cutting business rates, this year’s list will show a general 7.1% increase in rateable value. And according to the OBR report the government is forecasting that income from business rates will rise to nearly £36bn by 2027/28 (from £28.5bn in 2022/23), which appears contrary to the Conservatives’ manifesto pledge. The retail and hospitality sectors are still in line to make a major contribution to that increase.

We urge the chancellor not to ignore the call for urgent reform and use Budget 2023 to encourage investment and growth and help businesses of all sectors floundering in this over-burdensome and unfair system.

John Webber is head of business rates at Colliers