Government launches inquiry into business rates

Date: 5 February 2019

The inquiry will investigate how government policy on business rates has affected UK businesses and could pave the way for reforms.

It is inviting businesses to submit evidence; the deadline for written submissions is 2 April 2019. The scope of the inquiry includes an examination of how business rates policy has changed. It will also look at alternatives to property-based taxes, such as the proposed digital services tax, and investigate how changes to business rates could affect businesses.

Specific terms of reference include the impact of changes in business rates policy since 2017 on businesses, looking at:

  • The changes in reliefs and allowances;
  • The ability of businesses to pay;
  • The relationship between business rates and the behaviours it drives in business.

In addition, the inquiry will consider how the current business rate system measures up against the pillars of good tax policy, such as being fair, supporting growth, providing certainty and being coherent.

"Many high street businesses are struggling to remain competitive," Treasury committee chair Nicky Morgan MP said. "It has been estimated that 10,000 shops will close this year. Unless action is taken, closures could continue and job losses may soar.

"Business rates can represent a substantial financial burden on the high street. The Treasury committee is therefore launching an inquiry into the effectiveness and impact of these rates on business.

"At the end of the inquiry, we'll make a series of recommendations to government on the fairness and effectiveness of the current system, and how it could be improved."

The Federation of Small Businesses (FSB) has welcomed the inquiry. "FSB has worked with government to secure a set of reforms to business rates since 2016 - doubling small business rates relief, linking annual rises to CPI, transitional relief, and now a high streets discount," said Mike Cherry, FSB national chairman.

However, he said business rates remain "regressive" and that they are not linked to ability to pay. "A small business on the high street is hit by business rates before it makes its first £1 in turnover, let alone profit. These small firms are the lifeblood of our high streets, town centres and local communities."

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