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Retailers call to end London business rate ‘subsidy’

As over 50 retailers urge the government to reform business rates, London is in the firing line as businesses subsidise the capital’s rates bill by nearly £600m, while the ICAEW Tax Faculty sets out five areas for change in this month’s Budget.

March 2020

Over 50 major retailers are calling on the government to take the first steps towards fundamental business rates reform in this month’s Budget. The letter, coordinated by the British Retail Consortium, focuses on fixing transitional relief, a component of the business rates system.

Transitional relief limits the speed at which a firm’s business rates liability changes in response to changes in its rateable value. To achieve this, it staggers the speed at which ‘underpayers’ move to their higher business rate liability (upwards transition), and funds this by slowing the speed at which ‘overpayers’ move to their lower liability (downwards phasing).

The retailers claim that this system has two consequences: it forces retailers to subsidise other industries (£543m net over the last three years) while also forcing locations outside London to subsidise the capital’s businesses by £596m net over the last three years.

Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said: “The future of retail is an issue that matters to people everywhere… Yet transitional relief undermines both the industry as a whole, and many regions that it serves. Northern high streets effectively subsidise London banks, forcing a £600m transfer of wealth to the capital; this could be used to support investment in people and technology that would benefit all parts of the UK.”

At the same time, ICAEW Tax Faculty has written to the government, calling for a Budget that ensures the UK remains an internationally attractive and competitive location for business to locate and invest.

The submission called on the government to focus on five areas:

  1. Aligning the UK tax system with policy objectives
  2. Taking time to get legislative change right first time
  3. Reviewing the costs and benefits of Making Tax Digital
  4. Resourcing HMRC
  5. Seizing the opportunity to reform VAT

More details of ICAEW Tax Faculty’s Budget submission can be found here: ICAEWrep 02/20

The LSCA's Budget breakfast is now fully booked but you can still book onto ICAEW Croydon's Budget update here

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