NOW IS THE TIME FOR BUSINESS RATES REFORM

Gerald Eve Unveils Three Key Rates Reforms

Jerry Schurder, head of rating at property consultancy Gerald Eve, is to use this Thursday’s RICS Rating Conference to call for major reform of the business rates system.

In a scheduled speech, Jerry Schurder will argue that the business rates system is failing, going on to identify three key reforms:

• Create a system responsive to the market by revaluing properties annually

• Reduce by two thirds the number of properties liable for business rates

• Allow the tax take to vary in line with the wider economy

 

Speaking ahead of the conference, Jerry Schurder said: “When judged against the criteria of effectiveness, efficiency, fairness and transparency, it is clear that the business rates system is failing on all grounds. It has become a cumbersome, opaque albatross around the neck of businesses, stifling growth and placing too much of the burden on the shoulders of those that can least afford it.

“Whilst the business rate still has a key role amongst a basket of taxes, major reform is not just desirable, it is essential. These proposals would make the tax fairer, reduce costs and increase transparency, while building in enough flexibility to match rates bills to the wider economic realities.

“Firstly, moving to annual revaluations would ensure the burden is distributed fairly, adjusting rapidly to economic change. Frequent revaluations reduce ratepayers’ incentive to appeal due to the limited savings achievable, further cutting the administrative costs of the system. If combined with fuller disclosure of the evidence on which rates valuations are based, the number of appeals would be reduced to a bare minimum.

“Secondly, instead of the cumbersome and uncertain small business rates relief scheme, the large number of small properties included in the rating system needs to be drastically reduced. Two thirds of those currently assessed – around 1.15 million properties – contribute just over 6% of rates revenues. Making these properties exempt would be hugely beneficial for SMEs, while at the same time massively reducing the Valuation Office Agency’s workload and local councils’ collection costs.
“Finally, the Government needs to realise it can’t continue to use business rates as a cash cow. It is the only tax where the overall take doesn’t change in real terms no matter what the economic conditions of the day and there needs to be more flexibility to support businesses during hard times.

“There needs to be a review of how best to achieve this flexibility, but a good starting point would be to fix the UBR at an affordable level, with businesses’ contributions rising or falling in line with rates valuations. With annual revaluations, rates bills would better reflect current trading conditions, with total take falling during downturns and increasing during better times.

“As the economy shows the signs of a nascent recovery, now is the time for the Government to act on business rates reform. There is an excellent opportunity to reshape the system to support business, reduce administrative and collection costs and ensure that the greater burden falls on those most able to pay. I strongly urge the Government grasp that opportunity.”

 

Follow Jerry on Twitter: @jerryschurder