The Chancellor, Rishi Sunak, is expected to announce on Friday that he is delaying until later this year publication of the outcome of the ‘fundamental review’ of business rates. The Chancellor will seek to argue that postponing the report until the autumn will allow him to make decisions when the economic uncertainty caused by the pandemic has receded.
Robert Hayton, UK President of Property Tax at the real estate adviser Altus Group, Britain’s largest ratings advisory, says “the freeze to the multiplier and a discerning targeted extension to the rates holiday from 1st April buys the Chancellor time to develop a coherent strategy to taxing the digital economy in the longer term.”
The Government, in the run up to the General Election in 2019, promised a fundamental review of business rates publishing the terms of reference for that review at the Spring Budget in 2020 seeking views on how the system currently works, issues to be addressed, ideas for change, including an online sales tax.
The Conservative manifesto pledge also promised to permanently cut the overall rates burden but that pledge was made just months before the emergence of the global pandemic. Borrowing pushed the national debt to £2.1tn at the end of December, or about 99.4% GDP, the highest debt ratio since 1962.
This week the Ministry of Housing, Communities and Local Government revised upwards the cost of the business rates holiday for occupied retail, leisure and hospitality premises during 2020/21, to help negate the economic impact of the pandemic, to £11.06 billion in England with an extension for 2021/22 widely expected at the forthcoming Budget.
Hayton added “Against that backdrop, and increased spending for support during the ongoing restrictions and the months ahead, it is unclear whether the Chancellor remains committed to or now has the financial headroom to reduce the overall rates burden.”
In 1990/91, when business rates in their current form were first introduced, the standard rate of tax for business rates in England was 34.8p, a rate comparable to other tax rates at that time. UK Corporation tax was 34%.
Whilst Corporation tax today stands at 19%, in contrast, the standard rate of tax for business rates (multiplier) is 51.2p, a near 50% increase, resultant from compound inflation.
Business rates are devolved to Scotland, Wales and Northern Ireland