Cut business rates to 35% to help revitalise high streets and town centres
The British Property Federation (BPF) has called for business rates to be capped at 35% of rental levels to save businesses billions of pounds per year in tax and help revitalise high streets and town centres.
The latest inflationary rise of 6.7% will see business rates rise to 55% of rateable values (a proxy for rental values) for the 2024-25 financial year, adding to the cost pressures facing retail and hospitality businesses in particular.
Business rates is the only tax that increases with inflation and repeated increases has seen the underlying level of the tax, also known as the Uniform Business Rate (“UBR”), rise from 35% to 55% since it was introduced in 1990. In the same period the main rate of corporation tax has lowered from 35% to 25%.
The unsustainable level of business rates has contributed to an increase in shop vacancy across the UK and the decline of high streets. The BPF is calling for a phased decrease from 55% to 35% and for the UBR to then be fixed at that level, like other taxes. This change will ensure that business rates fluctuate only in line with changes in rental values.
In addition, it has called for Government to introduce annual revaluations so that the rates liability for a property reflects current market conditions and adjusts to changes in the economy more quickly.
The BPF is also arguing for an extension to Empty Rates Relief from three months to six months, with a 50% discount thereafter, to enable property owners sufficient time to upgrade properties and attract new tenants. An analysis of over 124,000 retail units undertaken by the BPF and Local Data Company in 2023 found that that the majority (57%) of vacant shops that had been reoccupied had remained empty for more than a year before a new tenant was found, underlining that the current relief period is insufficient.
Melanie Leech, Chief Executive, British Property Federation said: “We have reached the tipping point where the level of business rates is no longer sustainable for businesses, high streets or for the Treasury.
“The steady rise in the underlying rate to 55% is out of step with the wider tax system and ignores the mounting pressure on retail, leisure and hospitality businesses that are the lifeblood of our towns and cities.
“We are urging Government to take steps to cut the Uniform Business Rate to 35%, the level at which it was introduced in 1990. We believe this will make commercial premises viable for more businesses and could increase revenues to the Treasury over time. It is the type of bold reset and long-term thinking needed to boost local economies and drive growth.”
