Practical measures proposed by the Institute, such as a “rates break” and “rates-free period”, would enhance the system in the near-term and make it more business-friendly. A survey of 500 ICAEW members found that 62% would favour replacing the current business rates system with one that rewards investment and green upgrades as a means to achieving business growth in the UK.
In too many cases, the prospect of an increase in business rates acts as a tax on premises expansion and productivity investment, the Institute said, adding that the tax is a “major obstacle” to delivering a level playing field for businesses.
The Institute added that business rates continued to stand in the way of growth in spite of a number of reviews of the tax and a commitment from government to replace the system.
In its pre-Budget submission to HM Treasury, ICAEW outlined four ways the government could kickstart reform before any more substantive changes are made. The Institute suggested:
- a “rates break” on a new property when a business moves premises, to reduce costs associated with needing to retain two premises during transition, which would remove one disincentive for businesses to expand;
- rates-free periods or reductions to help a business increase in size, to prevent a lag between taking on increased costs and generating incremental revenue;
- increased limits under which properties can qualify for small rates relief, so more small properties are in scope;
- reducing by half the percentages by which rate liabilities can increase year-on-year under transitional relief.
These measures would support growth at minimal cost, while preserving the £29bn in revenues that business rates raises, the Institute added.
Frank Haskew, ICAEW Head of Taxation Policy, said:
“The business rates system is poorly designed and creates a major obstacle to delivering a level playing field for businesses.
“Bold action now – like a tax break for businesses moving to a new property – would be a shot in the arm for our high streets.
“While business rates remain an important source of revenue for local authorities, the system must be evolved to support a modern, dynamic economy that provides a more stable platform for businesses and for both central and local government.”
ENDS
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