Monday 20 February 2017 4:01 am

With companies in uproar over business rate increases, should the tax just be scrapped?

Edwin Morgan
Edwin Morgan is director of policy at the Institute of Directors.

Sancho Simmonds, a partner and scaleup lead at Smith & Williamson, says Yes.

Business rates belong in another age. They are an antiquated way of taxing companies and they don’t take into account the fact we are living in a modern age.

Many small companies have now been taken out of the range, but there is a huge risk that the changes will hurt our scaleup and larger businesses. Business rates only appear to limit the potential of our scaleups, so why have them at all?

Estimates suggest businesses that will be hit will see increases in bills of up to 245 per cent. Cash that should be spent on job creation and investment in growing will be used instead to settle the upcoming increases in business rates.

Indeed, the impact of business rates appears to run entirely counter to Prime Minister Theresa May’s speech at the CBI where she suggested the new strategy would help Britain overcome the long-standing challenges in our economy that have held us back for so long. Business rates are a long-standing challenge that are not currently being addressed.

Edwin Morgan, deputy director of policy at the Institute of Directors, says No.

As one of the few taxes that goes in part to local authorities, it would seem a strange time to get rid of business rates, just as the government attempts to give councils more control over their finances.

The UK generally has a very centralised tax system, but allowing authorities to keep 100 per cent of the growth in rates, coming into effect by the end of this Parliament, should help to make them focus on supporting their local business community.

That said, there are problems with the business rates system, which have been highlighted by the recent furore over this year’s revaluation. In the short term, the chancellor should use the Budget to raise the threshold for getting tax relief to premises with a rateable value of £100,000, to help small shops and pubs facing big increases in their bills.

Longer term, a much broader review is needed, to establish a level playing-field for high street and online retailers.

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