Abolishing business rates not the answer, says Colliers

Rating experts at property agent Colliers have said that “reform not abolition” of the business rates system is needed.

The comments come after shadow chancellor Rachel Reeves said that Labour plans to abolish business rates, while speaking during the party's conference in September.

Labour is unlikely to explain how this would work this side of an election, but has hinted that a new system will be based on a valuation process, potentially with a mix of land and rental value.

Keir Starmer's party is also believed to be supporting the removal of downward transition following the next revaluation; an extension of small business rates relief to those whose premises have rateable values of up to £25,000, rather than £15,000 at present; and an extension of the 50% relief from April 2023 up to £110,000.

“While we would support Labour if it introduced significant reform to the current system, we would not support total abolition or any form of Land Value tax,” says John Webber, head of business rates at Colliers.

“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.

Colliers’ view is that the current business rates system must certainly be radically reformed, but not thrown out altogether.

“We agree we need to look at other means of shoring up the tax take, but we are not in any way in favour of a total abolition of business rates – a tax which provides £26bn net to the exchequer. Business rates as a tax has been around for 400 years. It’s only the last 20 that it has been tinkered with so disastrously."

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