The government has resisted pressure from retailers and industry bodies to reform business rates, with the chancellor responding to calls from a group of influential MPs.
In a letter to parliament’s Treasury select committee, which urged the government to look at ways to incentivise investment, chancellor Philip Hammond said that a review of business rates in 2016 found “no consensus on an alternative base” for the calculation of rates bills.
The chancellor set out the his intention to make no changes to the current calculation of business rates, but acknowledged that the UK government needs ‘to find a better way of taxing the digital economy’.
Speaking in response to the letter, Treasury select committee chair Nicky Morgan said: “It’s clear that many bricks and mortar stores are struggling to remain competitive against online retailers, with the chancellor admitting that business rates can represent a high fixed cost for some businesses. The Treasury committee is increasingly concerned with the financial burden that business rates are placing on high street businesses, and has examined the issue in its inquiries into VAT and the VOA. We are likely to scrutinise business rates further as part of our Autumn Budget inquiry later this year.”
British Retail Consortium ceo Helen Dickinson, said: “We recognise that business rates reform and wholesale modernisation of the business taxation system is complex. However, the retail industry is looking for concrete action from HM Treasury, beginning with a two-year freeze in business rate increases and a firm commitment for wholesale reform alongside other business taxes. This would recognise the challenges the retail industry is facing and would allow a period of headroom during which industry and Government can consult on a fairer, more proportionate system of business taxation.”
Association of Convenience Stores (ACS) chief executive James Lowman added: “The current business rates system penalises retailers who invest in and improve their stores in the communities where they trade, while rates bills for large online distribution warehouses remain comparatively low. The chancellor is again recognising there are problems with the rates system, but we urgently need real change to rebalance the rates system, help high streets and local shops, and encourage businesses to change and invest. The time for warm words has long passed.”
During a Westminster Hall debate on the business rates system in June, several MPs including all party parliamentary small shops group chair Ruth George MP raised concerns about the impact of rates bills on convenience retailers. In the debate, Ruth George MP highlighted the inequalities in the method used to calculate business rates, noting that the current turnover based methodology unfairly targets forecourt retailers as well as retailers operating free to use cash machines.
In submissions to government, the ACS has repeatedly called for a change in the business rates system. Since the last revaluation, around one in three retailers have seen an increase in their business rates bills with some stores seeing increases of more than 100%.