“The Chancellor must cancel the business rates rises due next April when she announces her Autumn Budget next week, if she is truly serious about encouraging growth in the UK – and saving the High Street” says John Webber, Head of Business Rates at Colliers.
“If the Chancellor does not take action to reduce this rates burden, we will see more retail and pub chains going into administration, particularly as the £2.4 billion Retail, Leisure and Hospitality Relief is due to finish at the same time.”
Webber therefore urges the Chancellor to:
Cancel the planned business rates increases in April 2025-
which are due to increase 1.7% in line with the September 2024 rate of inflation and come on top of the eye watering 6.7% increase seen by larger businesses this last year who already face a multiplier of 54.6p in the pound.
This rise will impact 220,000 businesses who will pay an extra burden of £0.5 bn in tax from April 1, 2025. Colliers has estimated that businesses in the retail sector will pay over £105 million more in business rates, the offices sector around £115 million more and logistic/ industrial sector around £135 million more as a result of an increased multiplier.
Larger companies already pay more than 75% of the business rates burden and this rise will be a further hit to UK plc, dampen economic expansion and growth across the economy.
Announce a plan to reduce the multiplier long term-
The multiplier (the UBR used to calculate rate bills) should be reduced across the board for all sectors of business. Business rates are not linked to performance and property occupiers must pay them before they have earned a penny of income. At 49.9p and 54.6 for small and large businesses respectively, business rates are unacceptably high compared to the rate of 34p when they were introduced in 1990. The Chancellor therefore could restore investor confidence by announcing a long-term plan to reduce the multiplier to 34p, rebasing bills to a fairer level that everyone can afford to pay.
No other European country charges businesses half the rental value of their premises in property tax and at such a high rate, business rates are a significant deterrence to new investment in the UK. By reducing the UBR, the Government would encourage investment, expansion and innovation.
Review Reliefs–
Reducing the multiplier to an affordable level would preclude the need for many of the complicated reliefs most of which have been made necessary by the unaffordable level of the tax and to stave off disaster in the short term.
These reliefs have led to business rates deserts whereby 700,000 property occupiers out of 2.1 million pay no business rates all. Everyone that benefits from local public services should contribute to their maintenance but at a fair rate. Reliefs should also be reviewed every three years as a minimum to ensure they do not outlive their purpose.
Extend retail, hospitality and leisure relief until the next revaluation in 2026 –
The Chancellor’s extension of the 75% retail, hospitality and leisure relief was a welcome one and helped many beneficiaries in the short term. However, the temporary nature of the relief requires an annual review which leaves many businesses unable to plan for more than a year in the future. No pub, restaurant, café or small shop can realistically plan for the future if they are peering over the cliff edge of a 75% increase in their rates bill next year. The Chancellor should give them some confidence by confirming that the relief will be in place until at least until the next revaluation in 2026.
Extend Empty Property Rates Relief to Twelve Months and to Other Sectors–
The current empty property relief period is too short. Many property owners take up to 12 months to find an appropriate tenant for their properties. The Chancellor should therefore extend the three- and six-month empty rates holidays to twelve months for all property types including the offices and retail sectors too.
Round up the cowboys.-
Business rates advisors are among the only providers of financial advice that do not need a license to practice. Smaller businesses in particular fall victim to cowboy rating advisors because the system is too complicated to understand without professional help. Rogue agents often take upfront payments with the promise of lowering rates bills, before disappearing with their fees.
The new Duty to Notify in the Non-Domestic Rating Act 2023 will only exacerbate the problem as many small businesses that did not previously have to engage with the system will have to update the VOA concerning any changes to their property. The Government needs to protect small businesses by launching a consultation into rogue rating advisors’ practices and how they can be addressed. We would favour the establishment of a register of professional rating advisers.
John Webber concludes,
“Labour won the General Election in 2024 promising “to abolish the (business rates) tax” and thereby “save the high street”. Given the need to fill the £22 billion black hole, a policy to cut the £30 billion raised would seem to be out of the question, particularly given the state of local authority funding.”
“There has been press speculation that the Chancellor is looking at a lower multiplier for the retail and hospitality sectors- the BRC for example has called for a rates corrector with rates paid on retail property reduced by 20%. Or that she may be considering a targeted tax on the major warehouse distributors in an attempt to level the imbalance between the rates bills paid by physical and online retailers. While we would condone support to the sector, both policies miss the point: that the burden of this tax is just too high on all business sectors.
