Government to call for evidence for review of rates

The government has accompanied its budget announcement of changes to rate relief with a commitment to deliver its review of business rates.

It says it will issue a call for evidence in the spring and progress to publishing its report in the autumn.

We would urge business owners to contact us about any concerns they have with the system, any problems they have experienced and any changes they would like to see.

In the terms of reference published by HM Treasury, the government sets out its general view is that revenue should continue to be raised through the taxation of non-residential land and property.

It makes the point that business rates are less distortive than other taxes, easy to collect, and hard to avoid. However, the government also recognises concerns about the impact of business rates on ratepayers, including on the high street, and the potential need to modernise our tax system.

HM Treasury says the fundamental review of business rates will have the objective of:

  • reducing the overall burden on businesses
  • improving the current business rates system
  • considering more fundamental changes in the medium-to-long term

The work of the review will focus on:

  • improvements that could be made from April 2021, alongside the forthcoming revaluation including regarding the Transitional Relief Scheme
  • reforms to the current business rates system to put the tax on a more sustainable basis. This will include:
    • whether a tax on open market rental values remains the best base for commercial property
    • how open market rental values are determined, and how often the effectiveness and operation of different reliefs
    • how to minimise the impact of business rates on investment and growth, including the treatment of plant and machinery
    • how the business rates multiplier(s) should be set who pays the tax
  • the administration of business rates, covering the valuation and appeals process; billing; and compliance with the tax
  • exploring alternatives to business rates, particularly within the taxation of land and property.

HM Treasure said that alongside supporting the government in its core aims regarding the economy, productivity and its fiscal rules, the review will also have particular regard to:

  • the role of business rates in the funding of local government and local services, and the impact of any changes on business rates retention
  • the delivery of existing reforms to the business rates system
  • the practical challenges involved in any reforms, and necessary compromises

The review will be carried out by HM Treasury and will report to the Chancellor of the Exchequer and the Financial Secretary to the Treasury.