Business Rates Are 'Not Fit for Purpose' - UPDATE JLL Responds

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• Business Rates Are 'Not Fit for Purpose' - UPDATE JLL Responds

07 March 2014 | Updated 01 January 1970

A Parliamentary Committee has criticised UK business rates as damaging to the existing and future retail sector in Britain, stating: ‘We conclude that business rates, in their current form, are not fit for purpose.’

This indictment comes from the Business, Innovation and Skills Committee.

While acknowledging that the retail sector is a ‘success story’, it attacked the fact that business rate levels are the highest in the European Union and that they posed a serious threat to the continuation of the High Street. ‘Business rates are a substantial cost to doing business in the United Kingdom and are one of the highest forms of local property tax in the EU’, said a Committee report’.  It continued: ‘The evidence overwhelmingly cited the issue of business rates as one of the principal threats to the survival of existing retail businesses’.

The Parliamentary Committee went on to urge the Department of Business, Innovation and Skills to put pressure on the Treasury and the Department of Communities and Local Government so that the retail sector could be encouraged to develop and invest, rather than to see it as a cash cow that could be squeezed dry.

The key points for proposed reform are:

• Whether retail taxes should be based on sales, rather than on property.
• Whether the retail sector should have its own form of taxation, calculated in a different way from other businesses.
• How frequently the revaluation of Business Rates should take place.

The major criticisms to the proposals, such as those voiced by the British Chambers of Commerce, is that there has to be an acceptance that if change occurs, someone else will have to foot the difference. There was also a need to see business rates as affecting more than just the retail sector.

As an example of that, the Mormon Church in the UK has had to accept a decision by the European Court in Strasbourg this week that upheld a legal ruling that its Chorley temple was not exempt from business rates, although there was a reduced rate of 80% due to its charitable status.

Prime Minister, David Cameron, has accepted that the current system lacks the kind of fairness that should be there. Addressing the conference of the Federation of Small Businesses this week, he said reform was necessary but that there were inherent problems: ‘It is not going to be easy because rates raise about £24 billion and I don’t think there is any one solution that is going to make everybody happy.”

Mr Cameron was, however, told that the anomalies in the system have led to the situation where a local retail outlet in Rochdale was charged more per square metre than Harrods, proving that business rates were in desperate need of change.

Picture – image is for illustration only

JLL Responds

Commenting on the release of today’s report into the retail sector which includes calls for wholesale reform of business rates and plans to tackle skills shortages in the sector, Tim Beattie, Head of Rating at JLL said: “The recent report from the BRC recommended radical changes such as basing the tax on energy consumption or offering discounts on the basis of workforce growth and it seems the BIS Select Committee report is also supporting wholesale reform. What the retail sector would really benefit from is re-instatement of the 2015 revaluation date and restoration of empty property rate relief. This, coupled with a review of all other reliefs and exemptions and a permanent cap on the rate multiplier linked to CPI and not RPI, would demonstrate a true on-going commitment to business.”

James Brown, Head of European Retail Research at JLL added: “The report has flagged the need to increase digital skills in the sector as a way to ensure that customers can shop across multiple channels and adapt to the changing landscape. Embracing technology, adapting tenant mix to include increased food and leisure, or stepping up efforts to serve and communicate with customers are all ways in which retail places are changing and adapting. E-commerce is a major facet of this and will help complement retailing through physical store networks. Retailers who do not respond to the opportunity of changing technology and the increasingly virtual world will simply get left behind.”

Article written by Mike Gannon | Published 07 March 2014

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