Labour plan to abolish business rates is ‘naïve’
However, the political party’s ideas on reform shows it has been listening to the hospitality sector’s dissatisfaction with the current circumstances, according to the commercial property agent.
Talking about Labour’s announcement, made by shadow chancellor Rachel Reeves in Liverpool this week, Colliers said she hinted that a new system would be based on a valuation process, probably a mix of land and rental value.
It is also believed to be supporting the removal of downward transition following the next revaluation; small business rates relief to be extended to those whose premises have rateable values up to £25,000, rather than £15,000 at present – this could be paid for by increasing the rate of digital services tax; and an extension of the 50% relief from April 2023 up to £110,000.
Significant reform supported
John Webber, head of business rates at Colliers, said: “While we would support Labour if introduced significant reform to the current system, we would not support total abolition or any form of land value tax.”
The property agent added Labour has been talking about more frequent revaluations, instant reductions in bills where property values fall (so no phased downwards transition following a revaluation), rates to be more closely aligned to economic change, to reward businesses that move into empty premises (thereby helping the high street) and to incentive green improvements to businesses.
Webber continued: “These are all good aspects of reform of the system that we in the industry have been calling for, for years, and we would include a wider reform of reliefs and reforms to the appeals system. Labour does seem to be listening to businesses who have expressed their frustrations with the current system, cries that both the Conservative Government, and Lib Dems when in coalition, have been ignoring.
“However, if Labour is looking at a tax based on a valuation process (probably a mix of land and rental value), we do not think this would work as the tax would probably be levied on landlords. Business rates were set up to pay for the amenities and services that businesses use in the community so there should surely be no dispute that such businesses should pay something for these services.
One ‘certain’ tax
He added the additional tax could also backfire because landlords would most probably recuperate the money by hiking up rents charged to occupiers.
Webber concluded: “While we agree we need to look at other means of shoring up the tax take, we are not in any way in favour of a total abolition of business rates – a tax that provides £26bn net to the exchequer. Business rates as a tax has been around for 400 years – it’s only the past 20 that it has been tinkered with so disastrously.
“Total abolition would be naïve. Business rates is the one ‘certain’ tax. Given the economic situation in which the UK finds itself, with sterling plummeting, no politician worth their salt would suddenly get rid of this the most certain of taxes. This would also be the last thing the IMF would want to hear.”
