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UK: New business rates system to help struggling high streets proposed

16:00 18 February 2014

Shoppers in Ipswich Town centre

Shoppers in Ipswich Town centre

A new business rates system that supports job creation and helps revive struggling high streets should be brought in to replace the current “outdated and cumbersome” framework, ministers were told today.

The system could also be re-designed to encourage energy efficiency by basing payments on energy usage, according to the plans from the British Retail Consortium (BRC).

They have been produced by members of the BRC together with accountants Ernst & Young ahead of a discussion document on business rates due to be published by the Government in the spring.

The body said it hoped the proposals would stimulate debate on reform that “goes beyond tinkering with the existing system”.

Business groups have long argued that the current framework of rates discourages investment and is desperately in need of modernisation.

The BRC proposals include: shifting the basis for taxing property by replacing the current system with a tax based on other measures, such as energy usage; and rewarding job creation by offering a discount on the rates bill.

They also suggest easing the burden on successful businesses by offering a discount to businesses based on the corporation tax they are paying.

Finally, they call for a new, simplified, banded revaluation system for assessing rates, with revaluations on a more regular basis.

Rates are currently based on rental valuations set in 2008, when the cost of renting a shop or an office in many parts of the UK was far higher than today.

Helen Dickinson, BRC director general, said: “We have a once in a generation chance to fundamentally change the business rates system and the time is right to think creatively and in the best long term economic interests of the UK.

“These potential options would be good for the public, the economy and businesses small and large, while still providing significant tax revenues for the Government.”

Sainsbury’s finance director John Rogers, who chaired a group of executives leading the project, said: “The current system is outdated and cumbersome and does nothing to encourage retailers to invest.

“We believe we can do better for business and for tax payers and these options represent tangible progress in the debate.”

In December, high streets were given some relief when Chancellor George Osborne announced plans to offer small retailers a £1,000 discount on their business rates - as well as capping future rate increases at 2%.

The Chancellor also announced plans for new reoccupation relief to encourage use of vacant town centre shops, halving rates for new occupants.

The BRC hopes its proposals will create more jobs to add to the three million already employed in the retail industry.

A Treasury spokeswoman said: “At Autumn Statement 2013, the Government announced over £1 billion of business rates support which will benefit all 1.8m ratepayers.

“We are also taking action to improve the transparency, efficiency and responsiveness of business rates with a review of business rates administration.

“The terms of reference for the review were published last week and we look forward to engaging further with businesses and stakeholders once the discussion paper is published later in the spring.

“We welcome the BRC’s contribution to the discussion and will consider their options on administrative reform as part of our review.”

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